Correlation Between Wal Mart and Gruma SAB

Can any of the company-specific risk be diversified away by investing in both Wal Mart and Gruma 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 Gruma 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 Gruma SAB de, you can compare the effects of market volatilities on Wal Mart and Gruma 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 Gruma SAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wal Mart and Gruma SAB.

Diversification Opportunities for Wal Mart and Gruma SAB

-0.27

Correlation Coefficient

Wal Mart  Gruma SAB

Very good diversification

The 3 months correlation between Wal and Gruma is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Wal Mart de Mxico and Gruma SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gruma 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 Gruma SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gruma SAB de has no effect on the direction of Wal Mart i.e., Wal Mart and Gruma SAB go up and down completely randomly.

Pair Corralation between Wal Mart and Gruma SAB

Assuming the 90 days trading horizon Wal Mart de Mxico is expected to under-perform the Gruma SAB. In addition to that, Wal Mart is 1.18 times more volatile than Gruma SAB de. It trades about -0.02 of its total potential returns per unit of risk. Gruma SAB de is currently generating about 0.12 per unit of volatility. If you would invest  33,079  in Gruma SAB de on December 21, 2024 and sell it today you would earn a total of  3,541  from holding Gruma SAB de or generate 10.7% return on investment over 90 days.

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

Wal Mart de Mxico  vs.  Gruma SAB de

Wal Mart de

Risk-Adjusted Performance

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 somewhat strong essential indicators, Wal Mart is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Gruma SAB de

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gruma SAB de are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Gruma SAB may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Wal Mart and Gruma SAB

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

The idea behind Wal Mart de Mxico and Gruma 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.

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.