Correlation Between Walmart and BZAM

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

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

Diversification Opportunities for Walmart and BZAM

-0.69

Correlation Coefficient

Walmart  BZAM

Excellent diversification

The 3 months correlation between Walmart and BZAM is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and BZAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BZAM 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 BZAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BZAM has no effect on the direction of Walmart i.e., Walmart and BZAM go up and down completely randomly.

Pair Corralation between Walmart and BZAM

Considering the 90-day investment horizon Walmart is expected to generate 141.28 times less return on investment than BZAM. But when comparing it to its historical volatility, Walmart is 283.85 times less risky than BZAM. It trades about 0.56 of its potential returns per unit of risk. BZAM is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  0.01  in BZAM on September 4, 2024 and sell it today you would earn a total of  0.09  from holding BZAM or generate 900.0% return on investment over 90 days.

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

Walmart  vs.  BZAM

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 comparatively inconsistent primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

BZAM

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BZAM are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, BZAM reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and BZAM

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

The idea behind Walmart and BZAM 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.