Correlation Between BlackRock and Walmart

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

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

Diversification Opportunities for BlackRock and Walmart

0.78

Correlation Coefficient

BlackRock  Walmart

Poor diversification

The 3 months correlation between BlackRock and Walmart is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and BlackRock 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 BlackRock 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 BlackRock i.e., BlackRock and Walmart go up and down completely randomly.

Pair Corralation between BlackRock and Walmart

Considering the 90-day investment horizon BlackRock is expected to generate 1.44 times less return on investment than Walmart. But when comparing it to its historical volatility, BlackRock is 1.01 times less risky than Walmart. It trades about 0.11 of its potential returns per unit of risk. Walmart is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  8,076  in Walmart on October 4, 2024 and sell it today you would earn a total of  924.00  from holding Walmart or generate 11.44% return on investment over 90 days.

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

BlackRock  vs.  Walmart

BlackRock

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, BlackRock may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Walmart

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with BlackRock and Walmart

The main advantage of trading using opposite BlackRock and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlackRock 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 BlackRock 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.