Correlation Between Walmart and Almacenes Xito

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

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

Diversification Opportunities for Walmart and Almacenes Xito

-0.65

Correlation Coefficient

Walmart  Almacenes Xito

Excellent diversification

The 3 months correlation between Walmart and Almacenes is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Almacenes xito SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Almacenes xito 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 Almacenes Xito. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Almacenes xito SA has no effect on the direction of Walmart i.e., Walmart and Almacenes Xito go up and down completely randomly.

Pair Corralation between Walmart and Almacenes Xito

Considering the 90-day investment horizon Walmart is expected to generate 0.36 times more return on investment than Almacenes Xito. However, Walmart is 2.79 times less risky than Almacenes Xito. It trades about 0.14 of its potential returns per unit of risk. Almacenes xito SA is currently generating about -0.03 per unit of risk. If you would invest  4,709  in Walmart on September 3, 2024 and sell it today you would earn a total of  4,541  from holding Walmart or generate 96.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	67.79%
Values	Daily Returns

Walmart  vs.  Almacenes xito 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.

Almacenes xito SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Almacenes xito SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Walmart and Almacenes Xito

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

The idea behind Walmart and Almacenes xito 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.