Correlation Between Walmart and TotalEnergies

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

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

Diversification Opportunities for Walmart and TotalEnergies

-0.59

Correlation Coefficient

Walmart  TotalEnergies

Excellent diversification

The 3 months correlation between Walmart and TotalEnergies is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and TotalEnergies SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TotalEnergies SE 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 TotalEnergies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TotalEnergies SE has no effect on the direction of Walmart i.e., Walmart and TotalEnergies go up and down completely randomly.

Pair Corralation between Walmart and TotalEnergies

Assuming the 90 days trading horizon Walmart is expected to generate 0.57 times more return on investment than TotalEnergies. However, Walmart is 1.77 times less risky than TotalEnergies. It trades about 0.05 of its potential returns per unit of risk. TotalEnergies SE is currently generating about -0.23 per unit of risk. If you would invest  182,599  in Walmart on September 23, 2024 and sell it today you would earn a total of  2,401  from holding Walmart or generate 1.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Walmart  vs.  TotalEnergies SE

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.

TotalEnergies SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TotalEnergies SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Walmart and TotalEnergies

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

The idea behind Walmart and TotalEnergies SE 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.