Correlation Between Walmart and Kroger

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

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

Diversification Opportunities for Walmart and Kroger

0.54

Correlation Coefficient

Walmart  Kroger

Very weak diversification

The 3 months correlation between Walmart and Kroger is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Kroger Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kroger 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 Kroger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kroger has no effect on the direction of Walmart i.e., Walmart and Kroger go up and down completely randomly.

Pair Corralation between Walmart and Kroger

Assuming the 90 days trading horizon Walmart is expected to generate 16.76 times less return on investment than Kroger. But when comparing it to its historical volatility, Walmart is 19.41 times less risky than Kroger. It trades about 0.21 of its potential returns per unit of risk. Kroger Co is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  5,929  in Kroger Co on September 23, 2024 and sell it today you would earn a total of  348.00  from holding Kroger Co or generate 5.87% return on investment over 90 days.

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

Walmart  vs.  Kroger Co

Walmart

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Walmart is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Kroger

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kroger Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Kroger may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Walmart and Kroger

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

The idea behind Walmart and Kroger Co 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.