Correlation Between Walmart and PETRONAS Gas

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

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

Diversification Opportunities for Walmart and PETRONAS Gas

-0.3

Correlation Coefficient

Walmart  PETRONAS Gas

Very good diversification

The 3 months correlation between Walmart and PETRONAS is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and PETRONAS Gas Berhad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PETRONAS Gas Berhad 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 PETRONAS Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PETRONAS Gas Berhad has no effect on the direction of Walmart i.e., Walmart and PETRONAS Gas go up and down completely randomly.

Pair Corralation between Walmart and PETRONAS Gas

Considering the 90-day investment horizon Walmart is expected to under-perform the PETRONAS Gas. In addition to that, Walmart is 1.85 times more volatile than PETRONAS Gas Berhad. It trades about -0.19 of its total potential returns per unit of risk. PETRONAS Gas Berhad is currently generating about -0.25 per unit of volatility. If you would invest  400.00  in PETRONAS Gas Berhad on October 6, 2024 and sell it today you would lose (12.00) from holding PETRONAS Gas Berhad or give up 3.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Walmart  vs.  PETRONAS Gas Berhad

Walmart

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 16 (%) 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.

PETRONAS Gas Berhad

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Walmart and PETRONAS Gas

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

The idea behind Walmart and PETRONAS Gas Berhad 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.