Correlation Between Wal Mart and PriceSmart

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

Diversification Opportunities for Wal Mart and PriceSmart

0.05

Correlation Coefficient

Wal Mart  PriceSmart

Significant diversification

The 3 months correlation between Wal and PriceSmart is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Wal Mart de and PriceSmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PriceSmart 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 PriceSmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PriceSmart has no effect on the direction of Wal Mart i.e., Wal Mart and PriceSmart go up and down completely randomly.

Pair Corralation between Wal Mart and PriceSmart

Assuming the 90 days horizon Wal Mart de is expected to under-perform the PriceSmart. In addition to that, Wal Mart is 1.53 times more volatile than PriceSmart. It trades about -0.08 of its total potential returns per unit of risk. PriceSmart is currently generating about 0.03 per unit of volatility. If you would invest  8,809  in PriceSmart on September 3, 2024 and sell it today you would earn a total of  165.00  from holding PriceSmart or generate 1.87% 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.  PriceSmart

Wal Mart de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wal Mart de 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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

PriceSmart

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Wal Mart and PriceSmart

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

The idea behind Wal Mart de and PriceSmart 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.