Correlation Between Walmart and Pentair PLC

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

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

Diversification Opportunities for Walmart and Pentair PLC

-0.18

Correlation Coefficient

Walmart  Pentair PLC

Good diversification

The 3 months correlation between Walmart and Pentair is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC 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 Pentair PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair PLC has no effect on the direction of Walmart i.e., Walmart and Pentair PLC go up and down completely randomly.

Pair Corralation between Walmart and Pentair PLC

Assuming the 90 days trading horizon Walmart is expected to generate 0.04 times more return on investment than Pentair PLC. However, Walmart is 25.52 times less risky than Pentair PLC. It trades about 0.13 of its potential returns per unit of risk. Pentair PLC is currently generating about -0.19 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	95.16%
Values	Daily Returns

Walmart  vs.  Pentair PLC

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.

Pentair PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pentair PLC 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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Walmart and Pentair PLC

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

The idea behind Walmart and Pentair PLC 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.