Correlation Between Walmart and Axfood AB

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

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

Diversification Opportunities for Walmart and Axfood AB

-0.21

Correlation Coefficient

Walmart  Axfood AB

Very good diversification

The 3 months correlation between Walmart and Axfood is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Axfood AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axfood AB 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 Axfood AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axfood AB has no effect on the direction of Walmart i.e., Walmart and Axfood AB go up and down completely randomly.

Pair Corralation between Walmart and Axfood AB

Assuming the 90 days trading horizon Walmart is expected to generate 0.04 times more return on investment than Axfood AB. However, Walmart is 22.37 times less risky than Axfood AB. It trades about 0.13 of its potential returns per unit of risk. Axfood AB is currently generating about -0.02 per unit of risk. If you would invest  5,937  in Walmart on December 24, 2024 and sell it today you would earn a total of  23.00  from holding Walmart or generate 0.39% return on investment over 90 days.

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

Walmart  vs.  Axfood AB

Walmart

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 10 (%) 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.

Axfood AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Axfood AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Axfood AB is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Walmart and Axfood AB

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

The idea behind Walmart and Axfood AB 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.