Correlation Between BM European and Wal Mart
Can any of the company-specific risk be diversified away by investing in both BM European and Wal Mart 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 BM European and Wal Mart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BM European Value and Wal Mart de, you can compare the effects of market volatilities on BM European and Wal Mart 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 BM European with a short position of Wal Mart. Check out your portfolio center. Please also check ongoing floating volatility patterns of BM European and Wal Mart.
Diversification Opportunities for BM European and Wal Mart
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BMRPF and Wal is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding BM European Value and Wal Mart de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wal Mart de and BM European 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 BM European Value are associated (or correlated) with Wal Mart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wal Mart de has no effect on the direction of BM European i.e., BM European and Wal Mart go up and down completely randomly.
Pair Corralation between BM European and Wal Mart
Assuming the 90 days horizon BM European Value is expected to generate 2.16 times more return on investment than Wal Mart. However, BM European is 2.16 times more volatile than Wal Mart de. It trades about -0.01 of its potential returns per unit of risk. Wal Mart de is currently generating about -0.06 per unit of risk. If you would invest 652.00 in BM European Value on September 12, 2024 and sell it today you would lose (194.00) from holding BM European Value or give up 29.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BM European Value vs. Wal Mart de
Performance |
| Timeline |
| BM European Value |
| Wal Mart de |
BM European and Wal Mart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BM European and Wal Mart
The main advantage of trading using opposite BM European and Wal Mart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BM European position performs unexpectedly, Wal Mart 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 Wal Mart will offset losses from the drop in Wal Mart's long position.| BM European vs. Wal Mart de | BM European vs. Dollarama | BM European vs. PriceSmart | BM European vs. Dollar General |
| Wal Mart vs. V Group | Wal Mart vs. Fbec Worldwide | Wal Mart vs. Hiru Corporation | Wal Mart vs. Alkame Holdings |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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