Correlation Between Visa and Walmart

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

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

Diversification Opportunities for Visa and Walmart

0.37

Correlation Coefficient

Visa  Walmart

Weak diversification

The 3 months correlation between Visa and Walmart is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Visa 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 Visa Class A 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 Visa i.e., Visa and Walmart go up and down completely randomly.

Pair Corralation between Visa and Walmart

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.63 times more return on investment than Walmart. However, Visa Class A is 1.58 times less risky than Walmart. It trades about 0.13 of its potential returns per unit of risk. Walmart is currently generating about -0.09 per unit of risk. If you would invest  31,812  in Visa Class A on December 27, 2024 and sell it today you would earn a total of  2,606  from holding Visa Class A or generate 8.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Visa Class A  vs.  Walmart

Visa Class A

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Visa and Walmart

The main advantage of trading using opposite Visa and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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 Visa Class A 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.