Correlation Between Wal Mart and BM European
Can any of the company-specific risk be diversified away by investing in both Wal Mart and BM European 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 Wal Mart and BM European into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wal Mart de and BM European Value, you can compare the effects of market volatilities on Wal Mart and BM European 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 Wal Mart with a short position of BM European. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wal Mart and BM European.
Diversification Opportunities for Wal Mart and BM European
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Wal and BMRPF is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Wal Mart de and BM European Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BM European Value and Wal Mart 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 Wal Mart de are associated (or correlated) with BM European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BM European Value has no effect on the direction of Wal Mart i.e., Wal Mart and BM European go up and down completely randomly.
Pair Corralation between Wal Mart and BM European
Assuming the 90 days horizon Wal Mart de is expected to under-perform the BM European. But the otc stock apears to be less risky and, when comparing its historical volatility, Wal Mart de is 2.14 times less risky than BM European. The otc stock trades about -0.02 of its potential returns per unit of risk. The BM European Value is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 491.00 in BM European Value on August 31, 2024 and sell it today you would lose (65.00) from holding BM European Value or give up 13.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wal Mart de vs. BM European Value
Performance |
| Timeline |
| Wal Mart de |
| BM European Value |
Wal Mart and BM European Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wal Mart and BM European
The main advantage of trading using opposite Wal Mart and BM European positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wal Mart position performs unexpectedly, BM European 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 BM European will offset losses from the drop in BM European's long position.| Wal Mart vs. Wal Mart de | Wal Mart vs. Fomento Economico Mexicano | Wal Mart vs. Tesco PLC | Wal Mart vs. United Overseas Bank |
| BM European vs. BM European Value | BM European vs. Barratt Developments plc | BM European vs. J Sainsbury plc | BM European vs. Kingfisher plc |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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