Correlation Between Valero Energy and Walmart

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

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

Diversification Opportunities for Valero Energy and Walmart

0.33

Correlation Coefficient

Valero Energy  Walmart

Weak diversification

The 3 months correlation between Valero and Walmart is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Valero Energy and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Valero Energy 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 Valero Energy 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 Valero Energy i.e., Valero Energy and Walmart go up and down completely randomly.

Pair Corralation between Valero Energy and Walmart

Assuming the 90 days trading horizon Valero Energy is expected to under-perform the Walmart. In addition to that, Valero Energy is 1.5 times more volatile than Walmart. It trades about -0.08 of its total potential returns per unit of risk. Walmart is currently generating about 0.2 per unit of volatility. If you would invest  157,154  in Walmart on September 27, 2024 and sell it today you would earn a total of  26,348  from holding Walmart or generate 16.77% return on investment over 90 days.

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

Valero Energy  vs.  Walmart

Valero Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valero Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Walmart

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 15 (%) 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 Valero Energy and Walmart

The main advantage of trading using opposite Valero Energy and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valero Energy 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 Valero Energy 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.

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.