Correlation Between WEG SA and Walmart

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

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

Diversification Opportunities for WEG SA and Walmart

0.26

Correlation Coefficient

WEG SA  Walmart

Modest diversification

The 3 months correlation between WEG and Walmart is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding WEG SA and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and WEG SA 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 WEG SA 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 WEG SA i.e., WEG SA and Walmart go up and down completely randomly.

Pair Corralation between WEG SA and Walmart

Assuming the 90 days trading horizon WEG SA is expected to generate 4.82 times less return on investment than Walmart. But when comparing it to its historical volatility, WEG SA is 6.26 times less risky than Walmart. It trades about 0.06 of its potential returns per unit of risk. Walmart is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,540  in Walmart on September 23, 2024 and sell it today you would earn a total of  1,946  from holding Walmart or generate 126.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

WEG SA  vs.  Walmart

WEG SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WEG SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, WEG SA is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Walmart

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 18 (%) 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.

Pair Trading with WEG SA and Walmart

The main advantage of trading using opposite WEG SA and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WEG SA 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 WEG SA 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.