Correlation Between Naturgy BAN and Walmart
Can any of the company-specific risk be diversified away by investing in both Naturgy BAN and Walmart 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 Naturgy BAN and Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Naturgy BAN SA and Walmart, you can compare the effects of market volatilities on Naturgy BAN and Walmart 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 Naturgy BAN with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naturgy BAN and Walmart.
Diversification Opportunities for Naturgy BAN and Walmart
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Naturgy and Walmart is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Naturgy BAN SA and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Naturgy BAN 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 Naturgy BAN SA are associated (or correlated) with Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Naturgy BAN i.e., Naturgy BAN and Walmart go up and down completely randomly.
Pair Corralation between Naturgy BAN and Walmart
Assuming the 90 days trading horizon Naturgy BAN SA is expected to generate 3.38 times more return on investment than Walmart. However, Naturgy BAN is 3.38 times more volatile than Walmart. It trades about 0.12 of its potential returns per unit of risk. Walmart is currently generating about 0.07 per unit of risk. If you would invest 231,000 in Naturgy BAN SA on October 20, 2024 and sell it today you would earn a total of 20,500 from holding Naturgy BAN SA or generate 8.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.0% |
| Values | Daily Returns |
Naturgy BAN SA vs. Walmart
Performance |
| Timeline |
| Naturgy BAN SA |
| Walmart |
Naturgy BAN and Walmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naturgy BAN and Walmart
The main advantage of trading using opposite Naturgy BAN and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naturgy BAN position performs unexpectedly, Walmart 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 Walmart will offset losses from the drop in Walmart's long position.| Naturgy BAN vs. Transportadora de Gas | Naturgy BAN vs. Distribuidora de Gas | Naturgy BAN vs. Walmart | Naturgy BAN vs. Central Puerto SA |
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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