Correlation Between Walmart and Thermo Fisher

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

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

Diversification Opportunities for Walmart and Thermo Fisher

-0.74

Correlation Coefficient

Walmart  Thermo Fisher

Pay attention - limited upside

The 3 months correlation between Walmart and Thermo is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Thermo Fisher Scientific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thermo Fisher Scientific 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 Thermo Fisher. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thermo Fisher Scientific has no effect on the direction of Walmart i.e., Walmart and Thermo Fisher go up and down completely randomly.

Pair Corralation between Walmart and Thermo Fisher

Assuming the 90 days trading horizon Walmart is expected to generate 0.87 times more return on investment than Thermo Fisher. However, Walmart is 1.15 times less risky than Thermo Fisher. It trades about 0.23 of its potential returns per unit of risk. Thermo Fisher Scientific is currently generating about 0.03 per unit of risk. If you would invest  2,216  in Walmart on September 3, 2024 and sell it today you would earn a total of  1,263  from holding Walmart or generate 56.99% return on investment over 90 days.

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

Walmart  vs.  Thermo Fisher Scientific

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.

Thermo Fisher Scientific

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thermo Fisher Scientific has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Thermo Fisher 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 Thermo Fisher

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

The idea behind Walmart and Thermo Fisher Scientific 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.