Correlation Between Walmart and Dell Technologies

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

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

Diversification Opportunities for Walmart and Dell Technologies

0.38

Correlation Coefficient

Walmart  Dell Technologies

Weak diversification

The 3 months correlation between Walmart and Dell is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Dell Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dell Technologies and Walmart 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 Walmart are associated (or correlated) with Dell Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dell Technologies has no effect on the direction of Walmart i.e., Walmart and Dell Technologies go up and down completely randomly.

Pair Corralation between Walmart and Dell Technologies

Assuming the 90 days trading horizon Walmart is expected to generate 0.55 times more return on investment than Dell Technologies. However, Walmart is 1.8 times less risky than Dell Technologies. It trades about 0.3 of its potential returns per unit of risk. Dell Technologies is currently generating about 0.1 per unit of risk. If you would invest  2,712  in Walmart on October 7, 2024 and sell it today you would earn a total of  818.00  from holding Walmart or generate 30.16% return on investment over 90 days.

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

Walmart  vs.  Dell Technologies

Walmart

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 23 (%) 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.

Dell Technologies

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dell Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Dell Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Dell Technologies

The main advantage of trading using opposite Walmart and Dell Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Dell Technologies 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 Dell Technologies will offset losses from the drop in Dell Technologies' long position.

The idea behind Walmart and Dell Technologies 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.

Check out your portfolio center.

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.