Correlation Between Walmart and Banco Do

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

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

Diversification Opportunities for Walmart and Banco Do

0.68

Correlation Coefficient

Walmart  Banco Do

Poor diversification

The 3 months correlation between Walmart and Banco is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Banco Do Brasil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Do Brasil 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 Banco Do. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Do Brasil has no effect on the direction of Walmart i.e., Walmart and Banco Do go up and down completely randomly.

Pair Corralation between Walmart and Banco Do

Considering the 90-day investment horizon Walmart is expected to generate 2.38 times less return on investment than Banco Do. But when comparing it to its historical volatility, Walmart is 1.4 times less risky than Banco Do. It trades about 0.08 of its potential returns per unit of risk. Banco Do Brasil is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  406.00  in Banco Do Brasil on December 1, 2024 and sell it today you would earn a total of  69.00  from holding Banco Do Brasil or generate 17.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Walmart  vs.  Banco Do Brasil

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 April 2025.

Banco Do Brasil

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Do Brasil are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Banco Do showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Banco Do

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

The idea behind Walmart and Banco Do Brasil 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.