Correlation Between Walmart and China Life

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Can any of the company-specific risk be diversified away by investing in both Walmart and China Life 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 Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and China Life Insurance, you can compare the effects of market volatilities on Walmart and China Life 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 Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and China Life.

Diversification Opportunities for Walmart and China Life

-0.59
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Walmart and China is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and China Life Insurance Company L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Life Insurance 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 Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Life Insurance has no effect on the direction of Walmart i.e., Walmart and China Life go up and down completely randomly.

Pair Corralation between Walmart and China Life

Considering the 90-day investment horizon Walmart is expected to generate 0.99 times more return on investment than China Life. However, Walmart is 1.01 times less risky than China Life. It trades about -0.13 of its potential returns per unit of risk. China Life Insurance is currently generating about -0.14 per unit of risk. If you would invest  13,448  in Walmart on July 3, 2022 and sell it today you would lose (478.00)  from holding Walmart or give up 3.55% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy63.64%
ValuesDaily Returns

Walmart  vs.  China Life Insurance Company L

 Performance (%) 
       Timeline  
Walmart 
Walmart Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, Walmart is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Walmart Price Channel

China Life Insurance 
China Performance
0 of 100
Over the last 90 days China Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in November 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Walmart and China Life Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Walmart and China Life

The main advantage of trading using opposite Walmart and China Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, China Life 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 Life will offset losses from the drop in China Life's long position.
Walmart vs. Amazon Inc
The idea behind Walmart and China Life Insurance 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 Life vs. Amazon Inc
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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