Correlation Between Vale SA and Walmart
Can any of the company-specific risk be diversified away by investing in both Vale SA 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 Vale SA and Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale SA and Walmart, you can compare the effects of market volatilities on Vale SA 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 Vale SA with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Walmart.
Diversification Opportunities for Vale SA and Walmart
Pay attention - limited upside
The 3 months correlation between Vale and Walmart is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Vale SA 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 Vale 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 Vale SA i.e., Vale SA and Walmart go up and down completely randomly.
Pair Corralation between Vale SA and Walmart
Assuming the 90 days trading horizon Vale SA is expected to generate 0.91 times more return on investment than Walmart. However, Vale SA is 1.1 times less risky than Walmart. It trades about 0.24 of its potential returns per unit of risk. Walmart is currently generating about 0.07 per unit of risk. If you would invest 507,000 in Vale SA on October 20, 2024 and sell it today you would earn a total of 29,000 from holding Vale SA or generate 5.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Vale SA vs. Walmart
Performance |
| Timeline |
| Vale SA |
| Walmart |
Vale SA and Walmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and Walmart
The main advantage of trading using opposite Vale SA and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA 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.The idea behind Vale SA and Walmart 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.| Walmart vs. United States Steel | Walmart vs. Telecom Argentina | Walmart vs. Transportadora de Gas | Walmart vs. Agrometal SAI |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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