Correlation Between Wal Mart and Alsea SAB

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

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

Diversification Opportunities for Wal Mart and Alsea SAB

0.21

Correlation Coefficient

Wal Mart  Alsea SAB

Modest diversification

The 3 months correlation between Wal and Alsea is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Wal Mart de Mxico and Alsea SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alsea SAB de and Wal Mart 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 Wal Mart de Mxico are associated (or correlated) with Alsea SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alsea SAB de has no effect on the direction of Wal Mart i.e., Wal Mart and Alsea SAB go up and down completely randomly.

Pair Corralation between Wal Mart and Alsea SAB

Assuming the 90 days trading horizon Wal Mart de Mxico is expected to generate 0.81 times more return on investment than Alsea SAB. However, Wal Mart de Mxico is 1.23 times less risky than Alsea SAB. It trades about 0.06 of its potential returns per unit of risk. Alsea SAB de is currently generating about 0.02 per unit of risk. If you would invest  5,428  in Wal Mart de Mxico on December 30, 2024 and sell it today you would earn a total of  300.00  from holding Wal Mart de Mxico or generate 5.53% return on investment over 90 days.

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

Wal Mart de Mxico  vs.  Alsea SAB de

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 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating essential indicators, Wal Mart may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Alsea SAB de

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alsea SAB de are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Alsea SAB is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Wal Mart and Alsea SAB

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

The idea behind Wal Mart de Mxico and Alsea SAB de 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.