Correlation Between Walmart and Paz Oil
Can any of the company-specific risk be diversified away by investing in both Walmart and Paz Oil 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 Paz Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Paz Oil, you can compare the effects of market volatilities on Walmart and Paz Oil 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 Paz Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Paz Oil.
Diversification Opportunities for Walmart and Paz Oil
Poor diversification
The 3 months correlation between Walmart and Paz is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Paz Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paz Oil 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 Paz Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paz Oil has no effect on the direction of Walmart i.e., Walmart and Paz Oil go up and down completely randomly.
Pair Corralation between Walmart and Paz Oil
Considering the 90-day investment horizon Walmart is expected to generate 2.82 times less return on investment than Paz Oil. But when comparing it to its historical volatility, Walmart is 2.62 times less risky than Paz Oil. It trades about 0.18 of its potential returns per unit of risk. Paz Oil is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 3,035,867 in Paz Oil on January 26, 2024 and sell it today you would earn a total of 655,133 from holding Paz Oil or generate 21.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 77.42% |
| Values | Daily Returns |
Walmart vs. Paz Oil
Performance |
| Timeline |
| Walmart |
| Paz Oil |
Walmart and Paz Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Paz Oil
The main advantage of trading using opposite Walmart and Paz Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Paz Oil 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 Paz Oil will offset losses from the drop in Paz Oil's long position.| Walmart vs. Natural Grocers by | Walmart vs. Tesco PLC | Walmart vs. Casino Guichard Perrachon | Walmart vs. Kesko Oyj ADR |
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Check out your portfolio center.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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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