Correlation Between Walmart and Naturgy BAN
Can any of the company-specific risk be diversified away by investing in both Walmart and Naturgy BAN 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 Naturgy BAN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Naturgy BAN SA, you can compare the effects of market volatilities on Walmart and Naturgy BAN 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 Naturgy BAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Naturgy BAN.
Diversification Opportunities for Walmart and Naturgy BAN
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Walmart and Naturgy is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Naturgy BAN SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naturgy BAN SA 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 Naturgy BAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naturgy BAN SA has no effect on the direction of Walmart i.e., Walmart and Naturgy BAN go up and down completely randomly.
Pair Corralation between Walmart and Naturgy BAN
Assuming the 90 days trading horizon Walmart is expected to generate 0.18 times more return on investment than Naturgy BAN. However, Walmart is 5.49 times less risky than Naturgy BAN. It trades about 0.47 of its potential returns per unit of risk. Naturgy BAN SA is currently generating about 0.06 per unit of risk. If you would invest 588,000 in Walmart on November 2, 2024 and sell it today you would earn a total of 57,000 from holding Walmart or generate 9.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Walmart vs. Naturgy BAN SA
Performance |
| Timeline |
| Walmart |
| Naturgy BAN SA |
Walmart and Naturgy BAN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Naturgy BAN
The main advantage of trading using opposite Walmart and Naturgy BAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Naturgy BAN 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 Naturgy BAN will offset losses from the drop in Naturgy BAN's long position.| Walmart vs. Compania de Transporte | Walmart vs. Agrometal SAI | Walmart vs. Harmony Gold Mining | Walmart vs. Telecom Argentina |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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