Correlation Between Compania and Walmart
Can any of the company-specific risk be diversified away by investing in both Compania 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 Compania and Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compania de Transporte and Walmart, you can compare the effects of market volatilities on Compania 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 Compania with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania and Walmart.
Diversification Opportunities for Compania and Walmart
Poor diversification
The 3 months correlation between Compania and Walmart is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Transporte and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Compania 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 Compania de Transporte 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 Compania i.e., Compania and Walmart go up and down completely randomly.
Pair Corralation between Compania and Walmart
Assuming the 90 days trading horizon Compania de Transporte is expected to generate 0.84 times more return on investment than Walmart. However, Compania de Transporte is 1.2 times less risky than Walmart. It trades about 0.16 of its potential returns per unit of risk. Walmart is currently generating about 0.03 per unit of risk. If you would invest 17,400 in Compania de Transporte on September 19, 2024 and sell it today you would earn a total of 274,100 from holding Compania de Transporte or generate 1575.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compania de Transporte vs. Walmart
Performance |
| Timeline |
| Compania de Transporte |
| Walmart |
Compania and Walmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compania and Walmart
The main advantage of trading using opposite Compania and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compania 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.| Compania vs. Edesa Holding SA | Compania vs. Vista Energy, SAB | Compania vs. United States Steel | Compania vs. Pfizer Inc |
| Walmart vs. Compania de Transporte | Walmart vs. Harmony Gold Mining | Walmart vs. Agrometal SAI | Walmart vs. United States Steel |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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