Correlation Between Walmart and Pampa Energia
Can any of the company-specific risk be diversified away by investing in both Walmart and Pampa Energia 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 Pampa Energia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Pampa Energia SA, you can compare the effects of market volatilities on Walmart and Pampa Energia 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 Pampa Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Pampa Energia.
Diversification Opportunities for Walmart and Pampa Energia
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Walmart and Pampa is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Pampa Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pampa Energia 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 Pampa Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pampa Energia SA has no effect on the direction of Walmart i.e., Walmart and Pampa Energia go up and down completely randomly.
Pair Corralation between Walmart and Pampa Energia
Assuming the 90 days trading horizon Walmart is expected to generate 0.28 times more return on investment than Pampa Energia. However, Walmart is 3.55 times less risky than Pampa Energia. It trades about 0.47 of its potential returns per unit of risk. Pampa Energia SA is currently generating about -0.02 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart vs. Pampa Energia SA
Performance |
| Timeline |
| Walmart |
| Pampa Energia SA |
Walmart and Pampa Energia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Pampa Energia
The main advantage of trading using opposite Walmart and Pampa Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Pampa Energia 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 Pampa Energia will offset losses from the drop in Pampa Energia's long position.| Walmart vs. Compania de Transporte | Walmart vs. Agrometal SAI | Walmart vs. Harmony Gold Mining | Walmart vs. Telecom Argentina |
| Pampa Energia vs. Transportadora de Gas | Pampa Energia vs. Compania de Transporte | Pampa Energia vs. United States Steel | Pampa Energia vs. Harmony Gold Mining |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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