Correlation Between Walmart and Southern Copper

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

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

Diversification Opportunities for Walmart and Southern Copper

-0.19

Correlation Coefficient

Walmart  Southern Copper

Good diversification

The 3 months correlation between Walmart and Southern is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper 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 Southern Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Copper has no effect on the direction of Walmart i.e., Walmart and Southern Copper go up and down completely randomly.

Pair Corralation between Walmart and Southern Copper

Assuming the 90 days trading horizon Walmart is expected to generate 0.68 times more return on investment than Southern Copper. However, Walmart is 1.48 times less risky than Southern Copper. It trades about 0.22 of its potential returns per unit of risk. Southern Copper is currently generating about 0.07 per unit of risk. If you would invest  155,568  in Walmart on September 23, 2024 and sell it today you would earn a total of  29,432  from holding Walmart or generate 18.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Walmart  vs.  Southern Copper

Walmart

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 17 (%) 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.

Southern Copper

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Copper are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Southern Copper may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Walmart and Southern Copper

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

The idea behind Walmart and Southern Copper 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.