Correlation Between Walmart and BASF SE

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

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

Diversification Opportunities for Walmart and BASF SE

-0.7

Correlation Coefficient

Walmart  BASF SE

Excellent diversification

The 3 months correlation between Walmart and BASF is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and BASF SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE ADR 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 BASF SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BASF SE ADR has no effect on the direction of Walmart i.e., Walmart and BASF SE go up and down completely randomly.

Pair Corralation between Walmart and BASF SE

Considering the 90-day investment horizon Walmart is expected to generate 0.61 times more return on investment than BASF SE. However, Walmart is 1.64 times less risky than BASF SE. It trades about 0.13 of its potential returns per unit of risk. BASF SE ADR is currently generating about 0.01 per unit of risk. If you would invest  4,813  in Walmart on August 31, 2024 and sell it today you would earn a total of  4,375  from holding Walmart or generate 90.9% return on investment over 90 days.

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

Walmart  vs.  BASF SE ADR

Walmart

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

BASF SE ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Walmart and BASF SE

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

The idea behind Walmart and BASF SE ADR 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.