Correlation Between Wal Mart and Alsea SAB

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

By analyzing existing cross correlation between Wal Mart de Mxico and Alsea SAB de, you can compare the effects of market volatilities on Wal Mart and Alsea SAB 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 Wal Mart with a short position of Alsea SAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wal Mart and Alsea SAB.

Diversification Opportunities for Wal Mart and Alsea SAB

-0.58

Correlation Coefficient

Wal Mart  Alsea SAB

Excellent diversification

The 3 months correlation between Wal and Alsea is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Wal Mart de Mxico and Alsea SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alsea SAB de and Wal Mart 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 Wal Mart de Mxico are associated (or correlated) with Alsea SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alsea SAB de has no effect on the direction of Wal Mart i.e., Wal Mart and Alsea SAB go up and down completely randomly.

Pair Corralation between Wal Mart and Alsea SAB

Assuming the 90 days trading horizon Wal Mart de Mxico is expected to generate 0.98 times more return on investment than Alsea SAB. However, Wal Mart de Mxico is 1.03 times less risky than Alsea SAB. It trades about -0.07 of its potential returns per unit of risk. Alsea SAB de is currently generating about -0.21 per unit of risk. If you would invest  6,600  in Wal Mart de Mxico on February 6, 2024 and sell it today you would lose (166.00) from holding Wal Mart de Mxico or give up 2.52% of portfolio value over 90 days.

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

Wal Mart de Mxico  vs.  Alsea SAB de

Wal Mart de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wal Mart de Mxico has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Alsea SAB de

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alsea SAB de are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Alsea SAB may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Wal Mart and Alsea SAB

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

The idea behind Wal Mart de Mxico and Alsea SAB de 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.