Correlation Between Big Lots and Walmart

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

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

Diversification Opportunities for Big Lots and Walmart

0.0

Correlation Coefficient

Big Lots  Walmart

Pay attention - limited upside

The 3 months correlation between Big and Walmart is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Big Lots and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Big Lots 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 Big Lots 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 Big Lots i.e., Big Lots and Walmart go up and down completely randomly.

Pair Corralation between Big Lots and Walmart

If you would invest (100.00) in Big Lots on December 27, 2024 and sell it today you would earn a total of  100.00  from holding Big Lots or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Big Lots  vs.  Walmart

Big Lots

Risk-Adjusted Performance

Very Weak

Over the last 90 days Big Lots has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Big Lots is not utilizing all of its potentials. The new stock price disturbance, may contribute to mid-run losses for the stockholders.

Walmart

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Big Lots and Walmart

The main advantage of trading using opposite Big Lots and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Lots 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 Big Lots 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.