Correlation Between Promotora and Walmart

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

By analyzing existing cross correlation between Promotora y Operadora and Walmart, you can compare the effects of market volatilities on Promotora and Walmart 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 Promotora with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Promotora and Walmart.

Diversification Opportunities for Promotora and Walmart

0.91

Correlation Coefficient

Promotora  Walmart

Almost no diversification

The 3 months correlation between Promotora and Walmart is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Promotora y Operadora and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Promotora 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 Promotora y Operadora are associated (or correlated) with Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Promotora i.e., Promotora and Walmart go up and down completely randomly.

Pair Corralation between Promotora and Walmart

Assuming the 90 days trading horizon Promotora y Operadora is expected to generate 1.08 times more return on investment than Walmart. However, Promotora is 1.08 times more volatile than Walmart. It trades about 0.27 of its potential returns per unit of risk. Walmart is currently generating about 0.21 per unit of risk. If you would invest  12,012  in Promotora y Operadora on September 28, 2024 and sell it today you would earn a total of  2,987  from holding Promotora y Operadora or generate 24.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Promotora y Operadora  vs.  Walmart

Promotora y Operadora

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Promotora y Operadora are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Promotora disclosed solid returns over the last few months and may actually be approaching a breakup point.

Walmart

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Walmart showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Promotora and Walmart

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

The idea behind Promotora y Operadora and Walmart 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.