Correlation Between Wal Mart and BM European

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

By analyzing existing cross correlation between Wal Mart de and BM European Value, you can compare the effects of market volatilities on Wal Mart and BM European 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 BM European. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wal Mart and BM European.

Diversification Opportunities for Wal Mart and BM European

0.16

Correlation Coefficient

Wal Mart  BM European

Average diversification

The 3 months correlation between Wal and BMRPF is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Wal Mart de and BM European Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BM European Value 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 are associated (or correlated) with BM European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BM European Value has no effect on the direction of Wal Mart i.e., Wal Mart and BM European go up and down completely randomly.

Pair Corralation between Wal Mart and BM European

Assuming the 90 days horizon Wal Mart de is expected to generate 0.65 times more return on investment than BM European. However, Wal Mart de is 1.53 times less risky than BM European. It trades about 0.08 of its potential returns per unit of risk. BM European Value is currently generating about -0.09 per unit of risk. If you would invest  262.00  in Wal Mart de on December 28, 2024 and sell it today you would earn a total of  28.00  from holding Wal Mart de or generate 10.69% return on investment over 90 days.

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

Wal Mart de  vs.  BM European Value

Wal Mart de

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wal Mart de are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Wal Mart reported solid returns over the last few months and may actually be approaching a breakup point.

BM European Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days BM European Value has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Wal Mart and BM European

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

The idea behind Wal Mart de and BM European Value 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.