Correlation Between Pan Pacific and Wal-Mart

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

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

Diversification Opportunities for Pan Pacific and Wal-Mart

-0.36

Correlation Coefficient

Pan Pacific  Wal-Mart

Very good diversification

The 3 months correlation between Pan and Wal-Mart is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Pan Pacific International and Wal Mart de Mxico in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wal Mart de and Pan Pacific 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 Pan Pacific International are associated (or correlated) with Wal-Mart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wal Mart de has no effect on the direction of Pan Pacific i.e., Pan Pacific and Wal-Mart go up and down completely randomly.

Pair Corralation between Pan Pacific and Wal-Mart

Assuming the 90 days horizon Pan Pacific International is expected to under-perform the Wal-Mart. But the stock apears to be less risky and, when comparing its historical volatility, Pan Pacific International is 7.08 times less risky than Wal-Mart. The stock trades about -0.01 of its potential returns per unit of risk. The Wal Mart de Mxico is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  94.00  in Wal Mart de Mxico on September 3, 2024 and sell it today you would earn a total of  152.00  from holding Wal Mart de Mxico or generate 161.7% return on investment over 90 days.

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

Pan Pacific International  vs.  Wal Mart de Mxico

Pan Pacific International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pan Pacific International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Pan Pacific is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Wal Mart de

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wal Mart de Mxico are ranked lower than 12 (%) 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.

Pair Trading with Pan Pacific and Wal-Mart

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

The idea behind Pan Pacific International and Wal Mart de Mxico 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.

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.