Correlation Between Walmart and Erste Group

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

By analyzing existing cross correlation between Walmart and Erste Group Bank, you can compare the effects of market volatilities on Walmart and Erste Group 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 Erste Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Erste Group.

Diversification Opportunities for Walmart and Erste Group

0.81

Correlation Coefficient

Walmart  Erste Group

Very poor diversification

The 3 months correlation between Walmart and Erste is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Erste Group Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erste Group 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 Erste Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erste Group Bank has no effect on the direction of Walmart i.e., Walmart and Erste Group go up and down completely randomly.

Pair Corralation between Walmart and Erste Group

Assuming the 90 days trading horizon Walmart is expected to generate 52.72 times less return on investment than Erste Group. But when comparing it to its historical volatility, Walmart is 26.17 times less risky than Erste Group. It trades about 0.13 of its potential returns per unit of risk. Erste Group Bank is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  4,863  in Erste Group Bank on October 9, 2024 and sell it today you would earn a total of  970.00  from holding Erste Group Bank or generate 19.95% return on investment over 90 days.

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

Walmart  vs.  Erste Group Bank

Walmart

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Walmart is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Erste Group Bank

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Erste Group Bank are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Erste Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Erste Group

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

The idea behind Walmart and Erste Group 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.

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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.