Correlation Between Village Super and Walmart

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

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

Diversification Opportunities for Village Super and Walmart

0.77

Correlation Coefficient

Village Super  Walmart

Poor diversification

The 3 months correlation between Village and Walmart is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Village Super Market and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Village Super 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 Village Super Market 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 Village Super i.e., Village Super and Walmart go up and down completely randomly.

Pair Corralation between Village Super and Walmart

Assuming the 90 days horizon Village Super Market is expected to under-perform the Walmart. But the stock apears to be less risky and, when comparing its historical volatility, Village Super Market is 1.37 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 -0.02 of returns per unit of risk over similar time horizon. If you would invest  9,740  in Walmart on November 28, 2024 and sell it today you would lose (120.00) from holding Walmart or give up 1.23% of portfolio value over 90 days.

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

Village Super Market  vs.  Walmart

Village Super Market

Risk-Adjusted Performance

Weak

Over the last 90 days Village Super Market has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Village Super is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Walmart

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, Walmart is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Village Super and Walmart

The main advantage of trading using opposite Village Super and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Village Super 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 Village Super Market 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.