Correlation Between Walmart and Tele2 AB

Can any of the company-specific risk be diversified away by investing in both Walmart and Tele2 AB 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 Tele2 AB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walmart and Tele2 AB, you can compare the effects of market volatilities on Walmart and Tele2 AB 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 Tele2 AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Tele2 AB.

Diversification Opportunities for Walmart and Tele2 AB

0.3

Correlation Coefficient

Walmart  Tele2 AB

Weak diversification

The 3 months correlation between Walmart and Tele2 is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Tele2 AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tele2 AB 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 Tele2 AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tele2 AB has no effect on the direction of Walmart i.e., Walmart and Tele2 AB go up and down completely randomly.

Pair Corralation between Walmart and Tele2 AB

Considering the 90-day investment horizon Walmart is expected to generate 3.12 times less return on investment than Tele2 AB. But when comparing it to its historical volatility, Walmart is 1.42 times less risky than Tele2 AB. It trades about 0.05 of its potential returns per unit of risk. Tele2 AB is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  516.00  in Tele2 AB on November 28, 2024 and sell it today you would earn a total of  76.00  from holding Tele2 AB or generate 14.73% return on investment over 90 days.

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

Walmart  vs.  Tele2 AB

Walmart

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, Walmart is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Tele2 AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tele2 AB are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Tele2 AB showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Tele2 AB

The main advantage of trading using opposite Walmart and Tele2 AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Tele2 AB 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 Tele2 AB will offset losses from the drop in Tele2 AB's long position.

The idea behind Walmart and Tele2 AB 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.