Correlation Between Walmart and Kimberly Clark

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

By analyzing existing cross correlation between Walmart and Kimberly Clark, you can compare the effects of market volatilities on Walmart and Kimberly Clark 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 Kimberly Clark. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Kimberly Clark.

Diversification Opportunities for Walmart and Kimberly Clark

0.64

Correlation Coefficient

Walmart  Kimberly Clark

Poor diversification

The 3 months correlation between Walmart and Kimberly is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Kimberly Clark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimberly Clark 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 Kimberly Clark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimberly Clark has no effect on the direction of Walmart i.e., Walmart and Kimberly Clark go up and down completely randomly.

Pair Corralation between Walmart and Kimberly Clark

Assuming the 90 days trading horizon Walmart is expected to generate 0.99 times more return on investment than Kimberly Clark. However, Walmart is 1.01 times less risky than Kimberly Clark. It trades about 0.26 of its potential returns per unit of risk. Kimberly Clark is currently generating about 0.02 per unit of risk. If you would invest  2,768  in Walmart on October 10, 2024 and sell it today you would earn a total of  700.00  from holding Walmart or generate 25.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.31%
Values	Daily Returns

Walmart  vs.  Kimberly Clark

Walmart

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 20 (%) 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.

Kimberly Clark

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kimberly Clark are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Kimberly Clark is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Walmart and Kimberly Clark

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

The idea behind Walmart and Kimberly Clark 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.