Correlation Between Rocket Internet and Wal Mart

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

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

Diversification Opportunities for Rocket Internet and Wal Mart

0.2

Correlation Coefficient

Rocket Internet  Wal Mart

Modest diversification

The 3 months correlation between Rocket and Wal is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Internet SE 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 Rocket Internet 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 Rocket Internet SE 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 Rocket Internet i.e., Rocket Internet and Wal Mart go up and down completely randomly.

Pair Corralation between Rocket Internet and Wal Mart

Assuming the 90 days trading horizon Rocket Internet SE is expected to generate 0.69 times more return on investment than Wal Mart. However, Rocket Internet SE is 1.44 times less risky than Wal Mart. It trades about 0.1 of its potential returns per unit of risk. Wal Mart de Mxico is currently generating about 0.03 per unit of risk. If you would invest  1,450  in Rocket Internet SE on October 10, 2024 and sell it today you would earn a total of  50.00  from holding Rocket Internet SE or generate 3.45% return on investment over 90 days.

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

Rocket Internet SE  vs.  Wal Mart de Mxico

Rocket Internet SE

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rocket Internet SE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Rocket Internet is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Wal Mart de

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wal Mart de Mxico are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Wal Mart reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rocket Internet and Wal Mart

The main advantage of trading using opposite Rocket Internet and Wal Mart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocket Internet 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 Rocket Internet SE 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.