Correlation Between Walmart and Industrias

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

By analyzing existing cross correlation between Walmart and Industrias CH S, you can compare the effects of market volatilities on Walmart and Industrias 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 Industrias. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Industrias.

Diversification Opportunities for Walmart and Industrias

-0.55

Correlation Coefficient

Walmart  Industrias

Excellent diversification

The 3 months correlation between Walmart and Industrias is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Industrias CH S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrias CH S 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 Industrias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrias CH S has no effect on the direction of Walmart i.e., Walmart and Industrias go up and down completely randomly.

Pair Corralation between Walmart and Industrias

Assuming the 90 days trading horizon Walmart is expected to generate 1.19 times more return on investment than Industrias. However, Walmart is 1.19 times more volatile than Industrias CH S. It trades about -0.04 of its potential returns per unit of risk. Industrias CH S is currently generating about -0.12 per unit of risk. If you would invest  188,584  in Walmart on September 28, 2024 and sell it today you would lose (1,754) from holding Walmart or give up 0.93% of portfolio value over 90 days.

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

Walmart  vs.  Industrias CH S

Walmart

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Walmart showed solid returns over the last few months and may actually be approaching a breakup point.

Industrias CH S

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Industrias CH S has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Industrias is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Walmart and Industrias

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

The idea behind Walmart and Industrias CH S 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.