Correlation Between Walmart and BCM Resources

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

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

Diversification Opportunities for Walmart and BCM Resources

0.37

Correlation Coefficient

Walmart  BCM Resources

Weak diversification

The 3 months correlation between Walmart and BCM is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and BCM Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCM Resources 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 BCM Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCM Resources has no effect on the direction of Walmart i.e., Walmart and BCM Resources go up and down completely randomly.

Pair Corralation between Walmart and BCM Resources

Considering the 90-day investment horizon Walmart is expected to generate 4.08 times less return on investment than BCM Resources. But when comparing it to its historical volatility, Walmart is 4.61 times less risky than BCM Resources. It trades about 0.08 of its potential returns per unit of risk. BCM Resources is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3.53  in BCM Resources on November 30, 2024 and sell it today you would earn a total of  0.47  from holding BCM Resources or generate 13.31% return on investment over 90 days.

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

Walmart  vs.  BCM Resources

Walmart

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in March 2025.

BCM Resources

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BCM Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BCM Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and BCM Resources

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

The idea behind Walmart and BCM Resources 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.