Correlation Between Sendas Distribuidora and Walmart

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

By analyzing existing cross correlation between Sendas Distribuidora SA and Walmart, you can compare the effects of market volatilities on Sendas Distribuidora and Walmart 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 Sendas Distribuidora with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sendas Distribuidora and Walmart.

Diversification Opportunities for Sendas Distribuidora and Walmart

0.5

Correlation Coefficient

Sendas Distribuidora  Walmart

Very weak diversification

The 5 months correlation between Sendas and Walmart is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Sendas Distribuidora SA and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Sendas Distribuidora 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 Sendas Distribuidora SA are associated (or correlated) with Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Sendas Distribuidora i.e., Sendas Distribuidora and Walmart go up and down completely randomly.

Pair Corralation between Sendas Distribuidora and Walmart

Given the investment horizon of 90 days Sendas Distribuidora is expected to generate 10.12 times less return on investment than Walmart. In addition to that, Sendas Distribuidora is 2.95 times more volatile than Walmart. It trades about 0.01 of its total potential returns per unit of risk. Walmart is currently generating about 0.16 per unit of volatility. If you would invest  5,189  in Walmart on January 25, 2024 and sell it today you would earn a total of  798.00  from holding Walmart or generate 15.38% return on investment over 90 days.

Time Period	5 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Sendas Distribuidora SA  vs.  Walmart

Sendas Distribuidora

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sendas Distribuidora SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Sendas Distribuidora is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Walmart

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Sendas Distribuidora and Walmart

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

The idea behind Sendas Distribuidora SA and Walmart 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.