Correlation Between Telecom Argentina and Walmart

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

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

Diversification Opportunities for Telecom Argentina and Walmart

0.57

Correlation Coefficient

Telecom Argentina  Walmart

Very weak diversification

The 3 months correlation between Telecom and Walmart is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Argentina and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Telecom Argentina 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 Telecom Argentina 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 has no effect on the direction of Telecom Argentina i.e., Telecom Argentina and Walmart go up and down completely randomly.

Pair Corralation between Telecom Argentina and Walmart

Assuming the 90 days trading horizon Telecom Argentina is expected to generate 2.59 times more return on investment than Walmart. However, Telecom Argentina is 2.59 times more volatile than Walmart. It trades about 0.18 of its potential returns per unit of risk. Walmart is currently generating about 0.04 per unit of risk. If you would invest  207,000  in Telecom Argentina on September 15, 2024 and sell it today you would earn a total of  90,000  from holding Telecom Argentina or generate 43.48% return on investment over 90 days.

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

Telecom Argentina  vs.  Walmart

Telecom Argentina

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telecom Argentina are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Telecom Argentina sustained solid returns over the last few months and may actually be approaching a breakup point.

Walmart

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Walmart is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Telecom Argentina and Walmart

The main advantage of trading using opposite Telecom Argentina and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telecom Argentina 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 Telecom Argentina and Walmart 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 Transaction History module to view history of all your transactions and understand their impact on performance.