Correlation Between Walmart and Grupo Profuturo

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

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

Diversification Opportunities for Walmart and Grupo Profuturo

0.5

Correlation Coefficient

Walmart  Grupo Profuturo

Very weak diversification

The 3 months correlation between Walmart and Grupo is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Grupo Profuturo SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Profuturo SAB 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 Grupo Profuturo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Profuturo SAB has no effect on the direction of Walmart i.e., Walmart and Grupo Profuturo go up and down completely randomly.

Pair Corralation between Walmart and Grupo Profuturo

Assuming the 90 days trading horizon Walmart is expected to generate 1.16 times more return on investment than Grupo Profuturo. However, Walmart is 1.16 times more volatile than Grupo Profuturo SAB. It trades about 0.2 of its potential returns per unit of risk. Grupo Profuturo SAB is currently generating about 0.06 per unit of risk. If you would invest  158,648  in Walmart on September 29, 2024 and sell it today you would earn a total of  26,852  from holding Walmart or generate 16.93% return on investment over 90 days.

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

Walmart  vs.  Grupo Profuturo SAB

Walmart

Risk-Adjusted Performance

15 of 100

Solid

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.

Grupo Profuturo SAB

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Profuturo SAB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Grupo Profuturo is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Walmart and Grupo Profuturo

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

The idea behind Walmart and Grupo Profuturo SAB 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.