Correlation Between Walmart and Orange SA

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

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

Diversification Opportunities for Walmart and Orange SA

-0.76

Correlation Coefficient

Walmart  Orange SA

Pay attention - limited upside

The 3 months correlation between Walmart and Orange is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Orange SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange SA ADR 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 Orange SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orange SA ADR has no effect on the direction of Walmart i.e., Walmart and Orange SA go up and down completely randomly.

Pair Corralation between Walmart and Orange SA

Considering the 90-day investment horizon Walmart is expected to generate 15.04 times less return on investment than Orange SA. But when comparing it to its historical volatility, Walmart is 43.04 times less risky than Orange SA. It trades about 0.13 of its potential returns per unit of risk. Orange SA ADR is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  943.00  in Orange SA ADR on October 4, 2024 and sell it today you would earn a total of  1,319,057  from holding Orange SA ADR or generate 139878.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.59%
Values	Daily Returns

Walmart  vs.  Orange SA ADR

Walmart

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Orange SA ADR

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Orange SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very uncertain basic indicators, Orange SA displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Orange SA

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

The idea behind Walmart and Orange SA ADR 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.