Correlation Between GUDANG GARAM and Wal-Mart

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

By analyzing existing cross correlation between GUDANG GARAM and Wal Mart de Mxico, you can compare the effects of market volatilities on GUDANG GARAM and Wal-Mart 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 GUDANG GARAM with a short position of Wal-Mart. Check out your portfolio center. Please also check ongoing floating volatility patterns of GUDANG GARAM and Wal-Mart.

Diversification Opportunities for GUDANG GARAM and Wal-Mart

0.31

Correlation Coefficient

GUDANG GARAM  Wal-Mart

Weak diversification

The 3 months correlation between GUDANG and Wal-Mart is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding GUDANG GARAM and Wal Mart de Mxico in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wal Mart de and GUDANG GARAM 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 GUDANG GARAM are associated (or correlated) with Wal-Mart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wal Mart de has no effect on the direction of GUDANG GARAM i.e., GUDANG GARAM and Wal-Mart go up and down completely randomly.

Pair Corralation between GUDANG GARAM and Wal-Mart

Assuming the 90 days trading horizon GUDANG GARAM is expected to under-perform the Wal-Mart. But the stock apears to be less risky and, when comparing its historical volatility, GUDANG GARAM is 1.07 times less risky than Wal-Mart. The stock trades about -0.12 of its potential returns per unit of risk. The Wal Mart de Mxico is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  256.00  in Wal Mart de Mxico on December 2, 2024 and sell it today you would earn a total of  0.00  from holding Wal Mart de Mxico or generate 0.0% return on investment over 90 days.

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

GUDANG GARAM  vs.  Wal Mart de Mxico

GUDANG GARAM

Risk-Adjusted Performance

Very Weak

Over the last 90 days GUDANG GARAM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Wal Mart de

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wal Mart de Mxico are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Wal-Mart is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GUDANG GARAM and Wal-Mart

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

The idea behind GUDANG GARAM and Wal Mart de Mxico 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.