Correlation Between Wal Mart and Orbia Advance

Can any of the company-specific risk be diversified away by investing in both Wal Mart and Orbia Advance 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 Orbia Advance 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 Orbia Advance, you can compare the effects of market volatilities on Wal Mart and Orbia Advance 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 Orbia Advance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wal Mart and Orbia Advance.

Diversification Opportunities for Wal Mart and Orbia Advance

0.67

Correlation Coefficient

Wal Mart  Orbia Advance

Poor diversification

The 3 months correlation between Wal and Orbia is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Wal Mart de Mxico and Orbia Advance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orbia Advance 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 Orbia Advance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orbia Advance has no effect on the direction of Wal Mart i.e., Wal Mart and Orbia Advance go up and down completely randomly.

Pair Corralation between Wal Mart and Orbia Advance

Assuming the 90 days trading horizon Wal Mart de Mxico is expected to under-perform the Orbia Advance. But the stock apears to be less risky and, when comparing its historical volatility, Wal Mart de Mxico is 1.34 times less risky than Orbia Advance. The stock trades about -0.15 of its potential returns per unit of risk. The Orbia Advance is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  2,095  in Orbia Advance on August 31, 2024 and sell it today you would lose (273.00) from holding Orbia Advance or give up 13.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Wal Mart de Mxico  vs.  Orbia Advance

Wal Mart de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wal Mart de Mxico has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Orbia Advance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orbia Advance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Wal Mart and Orbia Advance

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

The idea behind Wal Mart de Mxico and Orbia Advance 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.