Correlation Between El Puerto and Wal Mart

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

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

Diversification Opportunities for El Puerto and Wal Mart

0.74

Correlation Coefficient

El Puerto  Wal Mart

Poor diversification

The 3 months correlation between LIVEPOLC-1 and Wal is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding El Puerto de 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 El Puerto 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 El Puerto de 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 El Puerto i.e., El Puerto and Wal Mart go up and down completely randomly.

Pair Corralation between El Puerto and Wal Mart

Assuming the 90 days trading horizon El Puerto de is expected to generate 0.87 times more return on investment than Wal Mart. However, El Puerto de is 1.15 times less risky than Wal Mart. It trades about -0.12 of its potential returns per unit of risk. Wal Mart de Mxico is currently generating about -0.11 per unit of risk. If you would invest  11,446  in El Puerto de on September 3, 2024 and sell it today you would lose (1,281) from holding El Puerto de or give up 11.19% of portfolio value over 90 days.

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

El Puerto de  vs.  Wal Mart de Mxico

El Puerto de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days El Puerto de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Wal Mart de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wal Mart de Mxico has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with El Puerto and Wal Mart

The main advantage of trading using opposite El Puerto and Wal Mart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if El Puerto 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 El Puerto de 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.