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 Inc 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

0.94

Correlation Coefficient

Visa  Walmart

Almost no diversification

The 3 months correlation between Visa and Walmart is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Visa Inc 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 Inc 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

Assuming the 90 days trading horizon Visa Inc is expected to under-perform the Walmart. But the stock apears to be less risky and, when comparing its historical volatility, Visa Inc is 1.01 times less risky than Walmart. The stock trades about -0.16 of its potential returns per unit of risk. The Walmart is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  3,636  in Walmart on October 15, 2024 and sell it today you would lose (85.00) from holding Walmart or give up 2.34% of portfolio value over 90 days.

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

Visa Inc  vs.  Walmart

Visa Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Visa sustained solid returns over the last few months and may actually be approaching a breakup point.

Walmart

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Walmart sustained solid returns over the last few months and may actually be approaching a breakup point.

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 Inc 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 Transaction History module to view history of all your transactions and understand their impact on performance.