Correlation Between Walmart and Marks

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

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

Diversification Opportunities for Walmart and Marks

0.24

Correlation Coefficient

Walmart  Marks

Modest diversification

The 3 months correlation between Walmart and Marks is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Marks and Spencer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marks and Spencer 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 Marks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marks and Spencer has no effect on the direction of Walmart i.e., Walmart and Marks go up and down completely randomly.

Pair Corralation between Walmart and Marks

Assuming the 90 days trading horizon Walmart is expected to generate 43.72 times less return on investment than Marks. But when comparing it to its historical volatility, Walmart is 34.59 times less risky than Marks. It trades about 0.13 of its potential returns per unit of risk. Marks and Spencer is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  28,436  in Marks and Spencer on September 30, 2024 and sell it today you would earn a total of  9,394  from holding Marks and Spencer or generate 33.04% return on investment over 90 days.

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

Walmart  vs.  Marks and Spencer

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.

Marks and Spencer

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marks and Spencer are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Marks is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Walmart and Marks

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

The idea behind Walmart and Marks and Spencer 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.