Correlation Between Compania and Walmart

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

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

Diversification Opportunities for Compania and Walmart

-0.24

Correlation Coefficient

Compania  Walmart

Very good diversification

The 3 months correlation between Compania and Walmart is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Transporte and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Compania 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 Compania de Transporte 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 Compania i.e., Compania and Walmart go up and down completely randomly.

Pair Corralation between Compania and Walmart

Assuming the 90 days trading horizon Compania is expected to generate 1.33 times less return on investment than Walmart. In addition to that, Compania is 2.24 times more volatile than Walmart. It trades about 0.03 of its total potential returns per unit of risk. Walmart is currently generating about 0.08 per unit of volatility. If you would invest  624,000  in Walmart on April 23, 2025 and sell it today you would earn a total of  49,000  from holding Walmart or generate 7.85% return on investment over 90 days.

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

Compania de Transporte  vs.  Walmart

Compania de Transporte

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Transporte are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Compania may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Walmart

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Compania and Walmart

The main advantage of trading using opposite Compania and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compania 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 Compania de Transporte 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.