Correlation Between Walmart and ERAMET SA

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

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

Diversification Opportunities for Walmart and ERAMET SA

-0.75

Correlation Coefficient

Walmart  ERAMET SA

Pay attention - limited upside

The 3 months correlation between Walmart and ERAMET is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and ERAMET SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ERAMET 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 ERAMET SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ERAMET SA has no effect on the direction of Walmart i.e., Walmart and ERAMET SA go up and down completely randomly.

Pair Corralation between Walmart and ERAMET SA

Considering the 90-day investment horizon Walmart is expected to generate 0.24 times more return on investment than ERAMET SA. However, Walmart is 4.2 times less risky than ERAMET SA. It trades about 0.13 of its potential returns per unit of risk. ERAMET SA is currently generating about 0.0 per unit of risk. If you would invest  4,796  in Walmart on September 3, 2024 and sell it today you would earn a total of  4,454  from holding Walmart or generate 92.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	65.25%
Values	Daily Returns

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

ERAMET SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ERAMET SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Walmart and ERAMET SA

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

The idea behind Walmart and ERAMET 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.