Correlation Between Brookfield and Walmart

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

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

Diversification Opportunities for Brookfield and Walmart

0.7

Correlation Coefficient

Brookfield  Walmart

Poor diversification

The 3 months correlation between Brookfield and Walmart is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield and Walmart Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart Inc CDR and Brookfield 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 Brookfield 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 Inc CDR has no effect on the direction of Brookfield i.e., Brookfield and Walmart go up and down completely randomly.

Pair Corralation between Brookfield and Walmart

Assuming the 90 days horizon Brookfield is expected to generate 1.03 times more return on investment than Walmart. However, Brookfield is 1.03 times more volatile than Walmart Inc CDR. It trades about -0.05 of its potential returns per unit of risk. Walmart Inc CDR is currently generating about -0.06 per unit of risk. If you would invest  8,279  in Brookfield on December 24, 2024 and sell it today you would lose (586.00) from holding Brookfield or give up 7.08% of portfolio value over 90 days.

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

Brookfield  vs.  Walmart Inc CDR

Brookfield

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brookfield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Walmart Inc CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walmart Inc CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Brookfield and Walmart

The main advantage of trading using opposite Brookfield and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield 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 Brookfield and Walmart Inc CDR 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.