Correlation Between Walmart and Recrusul

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

By analyzing existing cross correlation between Walmart and Recrusul SA, you can compare the effects of market volatilities on Walmart and Recrusul 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 Recrusul. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Recrusul.

Diversification Opportunities for Walmart and Recrusul

0.31

Correlation Coefficient

Walmart  Recrusul

Weak diversification

The 3 months correlation between Walmart and Recrusul is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Recrusul SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Recrusul 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 Recrusul. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Recrusul SA has no effect on the direction of Walmart i.e., Walmart and Recrusul go up and down completely randomly.

Pair Corralation between Walmart and Recrusul

Assuming the 90 days trading horizon Walmart is expected to generate 1.99 times less return on investment than Recrusul. But when comparing it to its historical volatility, Walmart is 5.17 times less risky than Recrusul. It trades about 0.24 of its potential returns per unit of risk. Recrusul SA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  98.00  in Recrusul SA on September 23, 2024 and sell it today you would earn a total of  30.00  from holding Recrusul SA or generate 30.61% return on investment over 90 days.

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

Walmart  vs.  Recrusul SA

Walmart

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Walmart sustained solid returns over the last few months and may actually be approaching a breakup point.

Recrusul SA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Recrusul SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Recrusul unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Recrusul

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

The idea behind Walmart and Recrusul SA 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.