Correlation Between Walmart and Volkswagen

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

By analyzing existing cross correlation between Walmart and Volkswagen AG 110, you can compare the effects of market volatilities on Walmart and Volkswagen 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 Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Volkswagen.

Diversification Opportunities for Walmart and Volkswagen

-0.9

Correlation Coefficient

Walmart  Volkswagen

Pay attention - limited upside

The 3 months correlation between Walmart and Volkswagen is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Volkswagen AG 110 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG 110 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 Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG 110 has no effect on the direction of Walmart i.e., Walmart and Volkswagen go up and down completely randomly.

Pair Corralation between Walmart and Volkswagen

Considering the 90-day investment horizon Walmart is expected to generate 0.54 times more return on investment than Volkswagen. However, Walmart is 1.84 times less risky than Volkswagen. It trades about 0.26 of its potential returns per unit of risk. Volkswagen AG 110 is currently generating about -0.18 per unit of risk. If you would invest  7,723  in Walmart on August 30, 2024 and sell it today you would earn a total of  1,465  from holding Walmart or generate 18.97% return on investment over 90 days.

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

Walmart  vs.  Volkswagen AG 110

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.

Volkswagen AG 110

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG 110 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Walmart and Volkswagen

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

The idea behind Walmart and Volkswagen AG 110 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.