Correlation Between Walmart and BM European

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

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

Diversification Opportunities for Walmart and BM European

-0.86

Correlation Coefficient

Walmart  BM European

Pay attention - limited upside

The 3 months correlation between Walmart and BMRRY is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and BM European Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BM European Value 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 BM European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BM European Value has no effect on the direction of Walmart i.e., Walmart and BM European go up and down completely randomly.

Pair Corralation between Walmart and BM European

Considering the 90-day investment horizon Walmart is expected to generate 4.37 times less return on investment than BM European. But when comparing it to its historical volatility, Walmart is 1.37 times less risky than BM European. It trades about 0.06 of its potential returns per unit of risk. BM European Value is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,745  in BM European Value on September 28, 2024 and sell it today you would earn a total of  100.00  from holding BM European Value or generate 5.73% return on investment over 90 days.

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

Walmart  vs.  BM European Value

Walmart

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

BM European Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BM European Value has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Walmart and BM European

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

The idea behind Walmart and BM European Value 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.