Correlation Between Walmart and Cosan SA

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

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

Diversification Opportunities for Walmart and Cosan SA

-0.72

Correlation Coefficient

Walmart  Cosan SA

Pay attention - limited upside

The 3 months correlation between Walmart and Cosan is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Cosan SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cosan SA 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 Cosan SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cosan SA has no effect on the direction of Walmart i.e., Walmart and Cosan SA go up and down completely randomly.

Pair Corralation between Walmart and Cosan SA

Assuming the 90 days trading horizon Walmart is expected to generate 1.43 times more return on investment than Cosan SA. However, Walmart is 1.43 times more volatile than Cosan SA. It trades about 0.36 of its potential returns per unit of risk. Cosan SA is currently generating about -0.17 per unit of risk. If you would invest  1,893  in Walmart on March 5, 2024 and sell it today you would earn a total of  251.00  from holding Walmart or generate 13.26% return on investment over 90 days.

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

Walmart  vs.  Cosan SA

Walmart

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Walmart sustained solid returns over the last few months and may actually be approaching a breakup point.

Cosan SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cosan SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Walmart and Cosan SA

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

The idea behind Walmart and Cosan SA 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.