Correlation Between Wal-Mart and SPORTING

Can any of the company-specific risk be diversified away by investing in both Wal-Mart and SPORTING 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 SPORTING into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wal Mart de Mxico and SPORTING, you can compare the effects of market volatilities on Wal-Mart and SPORTING 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 SPORTING. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wal-Mart and SPORTING.

Diversification Opportunities for Wal-Mart and SPORTING

0.19

Correlation Coefficient

Wal-Mart  SPORTING

Average diversification

The 3 months correlation between Wal-Mart and SPORTING is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Wal Mart de Mxico and SPORTING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPORTING 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 Mxico are associated (or correlated) with SPORTING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPORTING has no effect on the direction of Wal-Mart i.e., Wal-Mart and SPORTING go up and down completely randomly.

Pair Corralation between Wal-Mart and SPORTING

Assuming the 90 days trading horizon Wal Mart de Mxico is expected to generate 8.54 times more return on investment than SPORTING. However, Wal-Mart is 8.54 times more volatile than SPORTING. It trades about 0.11 of its potential returns per unit of risk. SPORTING is currently generating about 0.11 per unit of risk. If you would invest  163.00  in Wal Mart de Mxico on September 12, 2024 and sell it today you would earn a total of  99.00  from holding Wal Mart de Mxico or generate 60.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Wal Mart de Mxico  vs.  SPORTING

Wal Mart de

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wal Mart de Mxico are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Wal-Mart reported solid returns over the last few months and may actually be approaching a breakup point.

SPORTING

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPORTING are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, SPORTING may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Wal-Mart and SPORTING

The main advantage of trading using opposite Wal-Mart and SPORTING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wal-Mart position performs unexpectedly, SPORTING 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 SPORTING will offset losses from the drop in SPORTING's long position.

The idea behind Wal Mart de Mxico and SPORTING 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.

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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 Anywhere module to track or share privately all of your investments from the convenience of any device.