Correlation Between Walmart and BHP Group
Can any of the company-specific risk be diversified away by investing in both Walmart and BHP Group 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 Walmart and BHP Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and BHP Group Limited, you can compare the effects of market volatilities on Walmart and BHP Group 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 Walmart with a short position of BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and BHP Group.
Diversification Opportunities for Walmart and BHP Group
Excellent diversification
The 3 months correlation between Walmart and BHP is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and BHP Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group Limited and Walmart 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 Walmart are associated (or correlated) with BHP Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group Limited has no effect on the direction of Walmart i.e., Walmart and BHP Group go up and down completely randomly.
Pair Corralation between Walmart and BHP Group
Assuming the 90 days trading horizon Walmart is expected to generate 0.66 times more return on investment than BHP Group. However, Walmart is 1.51 times less risky than BHP Group. It trades about 0.11 of its potential returns per unit of risk. BHP Group Limited is currently generating about -0.06 per unit of risk. If you would invest 560,000 in Walmart on November 2, 2024 and sell it today you would earn a total of 85,000 from holding Walmart or generate 15.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.04% |
| Values | Daily Returns |
Walmart vs. BHP Group Limited
Performance |
| Timeline |
| Walmart |
| BHP Group Limited |
Walmart and BHP Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and BHP Group
The main advantage of trading using opposite Walmart and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, BHP Group 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 BHP Group will offset losses from the drop in BHP Group's long position.| Walmart vs. Compania de Transporte | Walmart vs. Agrometal SAI | Walmart vs. Harmony Gold Mining | Walmart vs. Telecom Argentina |
| BHP Group vs. Harmony Gold Mining | BHP Group vs. Compania de Transporte | BHP Group vs. Agrometal SAI | BHP Group 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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