Correlation Between Walmart and Bayerische Motoren

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

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

Diversification Opportunities for Walmart and Bayerische Motoren

-0.82

Correlation Coefficient

Walmart  Bayerische Motoren

Pay attention - limited upside

The 3 months correlation between Walmart and Bayerische is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Bayerische Motoren Werke in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayerische Motoren Werke 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 Bayerische Motoren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayerische Motoren Werke has no effect on the direction of Walmart i.e., Walmart and Bayerische Motoren go up and down completely randomly.

Pair Corralation between Walmart and Bayerische Motoren

Considering the 90-day investment horizon Walmart is expected to generate 18.23 times more return on investment than Bayerische Motoren. However, Walmart is 18.23 times more volatile than Bayerische Motoren Werke. It trades about 0.47 of its potential returns per unit of risk. Bayerische Motoren Werke is currently generating about -0.21 per unit of risk. If you would invest  8,499  in Walmart on September 13, 2024 and sell it today you would earn a total of  997.00  from holding Walmart or generate 11.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Walmart  vs.  Bayerische Motoren Werke

Walmart

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 19 (%) 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.

Bayerische Motoren Werke

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bayerische Motoren Werke has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Walmart and Bayerische Motoren

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

The idea behind Walmart and Bayerische Motoren Werke 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.