Correlation Between Walmart and Telefnica

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

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

Diversification Opportunities for Walmart and Telefnica

0.84

Correlation Coefficient

Walmart  Telefnica

Very poor diversification

The 3 months correlation between Walmart and Telefnica is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Telefnica SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefnica SA 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 Telefnica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefnica SA has no effect on the direction of Walmart i.e., Walmart and Telefnica go up and down completely randomly.

Pair Corralation between Walmart and Telefnica

Assuming the 90 days trading horizon Walmart is expected to generate 1.45 times more return on investment than Telefnica. However, Walmart is 1.45 times more volatile than Telefnica SA. It trades about 0.28 of its potential returns per unit of risk. Telefnica SA is currently generating about 0.18 per unit of risk. If you would invest  155,457  in Walmart on October 14, 2024 and sell it today you would earn a total of  37,643  from holding Walmart or generate 24.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Walmart  vs.  Telefnica SA

Walmart

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 21 (%) 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.

Telefnica SA

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telefnica SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Telefnica may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Walmart and Telefnica

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

The idea behind Walmart and Telefnica SA 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..