Correlation Between Walmart and China Merchants

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Can any of the company-specific risk be diversified away by investing in both Walmart and China Merchants at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Walmart and China Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and China Merchants Bank, you can compare the effects of market volatilities on Walmart and China Merchants and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Walmart with a short position of China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and China Merchants.

Diversification Opportunities for Walmart and China Merchants

-0.81
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Walmart and China is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and China Merchants Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Merchants Bank and Walmart is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Walmart are associated (or correlated) with China Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Merchants Bank has no effect on the direction of Walmart i.e., Walmart and China Merchants go up and down completely randomly.

Pair Corralation between Walmart and China Merchants

Considering the 90-day investment horizon Walmart is expected to generate 0.58 times more return on investment than China Merchants. However, Walmart is 1.71 times less risky than China Merchants. It trades about -0.01 of its potential returns per unit of risk. China Merchants Bank is currently generating about -0.01 per unit of risk. If you would invest  14,526  in Walmart on June 28, 2022 and sell it today you would lose (1,395)  from holding Walmart or give up 9.6% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Walmart  vs.  China Merchants Bank

 Performance (%) 
       Timeline  
Walmart 
Walmart Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in October 2022.

Walmart Price Channel

China Merchants Bank 
China Performance
0 of 100
Over the last 90 days China Merchants Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in October 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

China Price Channel

Walmart and China Merchants Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Walmart and China Merchants

The main advantage of trading using opposite Walmart and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, China Merchants can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in China Merchants will offset losses from the drop in China Merchants' long position.
Walmart vs. Wal-Mart DE Mex
Walmart vs. Kibush Capital Corp
The idea behind Walmart and China Merchants Bank pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
China Merchants vs. Kibush Capital Corp
Check out your portfolio center. Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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