Correlation Between Walmart and Galp Energia

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

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

Diversification Opportunities for Walmart and Galp Energia

-0.68

Correlation Coefficient

Walmart  Galp Energia

Excellent diversification

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

Pair Corralation between Walmart and Galp Energia

Considering the 90-day investment horizon Walmart is expected to generate 0.43 times more return on investment than Galp Energia. However, Walmart is 2.31 times less risky than Galp Energia. It trades about 0.26 of its potential returns per unit of risk. Galp Energia SGPS is currently generating about -0.04 per unit of risk. If you would invest  7,966  in Walmart on September 12, 2024 and sell it today you would earn a total of  1,489  from holding Walmart or generate 18.69% return on investment over 90 days.

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

Walmart  vs.  Galp Energia SGPS

Walmart

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Galp Energia SGPS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Galp Energia SGPS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Galp Energia is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Walmart and Galp Energia

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

The idea behind Walmart and Galp Energia SGPS 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.