Correlation Between Walmart and Marfrig Global

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

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

Diversification Opportunities for Walmart and Marfrig Global

0.74

Correlation Coefficient

Walmart  Marfrig Global

Poor diversification

The 3 months correlation between Walmart and Marfrig is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Marfrig Global Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marfrig Global Foods and Walmart 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 Walmart are associated (or correlated) with Marfrig Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marfrig Global Foods has no effect on the direction of Walmart i.e., Walmart and Marfrig Global go up and down completely randomly.

Pair Corralation between Walmart and Marfrig Global

Assuming the 90 days trading horizon Walmart is expected to generate 1.22 times less return on investment than Marfrig Global. But when comparing it to its historical volatility, Walmart is 1.59 times less risky than Marfrig Global. It trades about 0.26 of its potential returns per unit of risk. Marfrig Global Foods is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,394  in Marfrig Global Foods on September 2, 2024 and sell it today you would earn a total of  483.00  from holding Marfrig Global Foods or generate 34.65% return on investment over 90 days.

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

Walmart  vs.  Marfrig Global Foods

Walmart

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Walmart sustained solid returns over the last few months and may actually be approaching a breakup point.

Marfrig Global Foods

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Marfrig Global Foods are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Marfrig Global unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Marfrig Global

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

The idea behind Walmart and Marfrig Global Foods 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 Commodity Directory module to find actively traded commodities issued by global exchanges.