Correlation Between PREMIER FOODS and Walmart

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

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

Diversification Opportunities for PREMIER FOODS and Walmart

-0.25

Correlation Coefficient

PREMIER FOODS  Walmart

Very good diversification

The 3 months correlation between PREMIER and Walmart is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding PREMIER FOODS and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and PREMIER FOODS 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 PREMIER FOODS 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 PREMIER FOODS i.e., PREMIER FOODS and Walmart go up and down completely randomly.

Pair Corralation between PREMIER FOODS and Walmart

Assuming the 90 days trading horizon PREMIER FOODS is expected to under-perform the Walmart. In addition to that, PREMIER FOODS is 2.13 times more volatile than Walmart. It trades about -0.08 of its total potential returns per unit of risk. Walmart is currently generating about 0.1 per unit of volatility. If you would invest  8,752  in Walmart on October 26, 2024 and sell it today you would earn a total of  128.00  from holding Walmart or generate 1.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

PREMIER FOODS  vs.  Walmart

PREMIER FOODS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PREMIER FOODS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, PREMIER FOODS is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Walmart

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PREMIER FOODS and Walmart

The main advantage of trading using opposite PREMIER FOODS and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PREMIER FOODS 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 PREMIER FOODS 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.