Correlation Between Walmart and Grupo KUO

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

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

Diversification Opportunities for Walmart and Grupo KUO

0.22

Correlation Coefficient

Walmart  Grupo KUO

Modest diversification

The 3 months correlation between Walmart and Grupo is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Grupo KUO SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo KUO 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 KUO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo KUO SAB has no effect on the direction of Walmart i.e., Walmart and Grupo KUO go up and down completely randomly.

Pair Corralation between Walmart and Grupo KUO

Assuming the 90 days trading horizon Walmart is expected to generate 0.77 times more return on investment than Grupo KUO. However, Walmart is 1.29 times less risky than Grupo KUO. It trades about 0.12 of its potential returns per unit of risk. Grupo KUO SAB is currently generating about 0.01 per unit of risk. If you would invest  90,133  in Walmart on September 24, 2024 and sell it today you would earn a total of  94,867  from holding Walmart or generate 105.25% 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.  Grupo KUO SAB

Walmart

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 17 (%) 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 KUO SAB

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo KUO SAB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Grupo KUO is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Walmart and Grupo KUO

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

The idea behind Walmart and Grupo KUO 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.