Correlation Between Oracle and Walmart

Can any of the company-specific risk be diversified away by investing in both Oracle and Walmart 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 Oracle and Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Oracle and Walmart, you can compare the effects of market volatilities on Oracle and Walmart 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 Oracle with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oracle and Walmart.

Diversification Opportunities for Oracle and Walmart

0.58

Correlation Coefficient

Oracle  Walmart

Very weak diversification

The 3 months correlation between Oracle and Walmart is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Oracle and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Oracle 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 Oracle are associated (or correlated) with Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Oracle i.e., Oracle and Walmart go up and down completely randomly.

Pair Corralation between Oracle and Walmart

Assuming the 90 days trading horizon Oracle is expected to generate 1.65 times less return on investment than Walmart. But when comparing it to its historical volatility, Oracle is 1.87 times less risky than Walmart. It trades about 0.3 of its potential returns per unit of risk. Walmart is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  1,922  in Walmart on February 26, 2024 and sell it today you would earn a total of  188.00  from holding Walmart or generate 9.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Oracle  vs.  Walmart

Oracle

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oracle are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Oracle sustained solid returns over the last few months and may actually be approaching a breakup point.

Walmart

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Walmart sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oracle and Walmart

The main advantage of trading using opposite Oracle and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oracle position performs unexpectedly, Walmart 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 Walmart will offset losses from the drop in Walmart's long position.

The idea behind Oracle and Walmart 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.

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 the Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.