Correlation Between Walmart and Talanx AG

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

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

Diversification Opportunities for Walmart and Talanx AG

0.85

Correlation Coefficient

Walmart  Talanx AG

Very poor diversification

The 3 months correlation between Walmart and Talanx is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Talanx AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talanx AG and Walmart 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 Walmart are associated (or correlated) with Talanx AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talanx AG has no effect on the direction of Walmart i.e., Walmart and Talanx AG go up and down completely randomly.

Pair Corralation between Walmart and Talanx AG

Assuming the 90 days horizon Walmart is expected to generate 1.1 times less return on investment than Talanx AG. But when comparing it to its historical volatility, Walmart is 1.21 times less risky than Talanx AG. It trades about 0.14 of its potential returns per unit of risk. Talanx AG is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,701  in Talanx AG on October 5, 2024 and sell it today you would earn a total of  4,424  from holding Talanx AG or generate 119.54% return on investment over 90 days.

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

Walmart  vs.  Talanx AG

Walmart

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Walmart has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Walmart reported solid returns over the last few months and may actually be approaching a breakup point.

Talanx AG

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Talanx AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Talanx AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Talanx AG

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

The idea behind Walmart and Talanx AG 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.