Correlation Between Walmart and United Natural

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

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

Diversification Opportunities for Walmart and United Natural

0.82

Correlation Coefficient

Walmart  United Natural

Very poor diversification

The 3 months correlation between Walmart and United is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and United Natural Foods, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Natural Foods, 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 United Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Natural Foods, has no effect on the direction of Walmart i.e., Walmart and United Natural go up and down completely randomly.

Pair Corralation between Walmart and United Natural

Assuming the 90 days trading horizon Walmart is expected to generate 2.15 times less return on investment than United Natural. But when comparing it to its historical volatility, Walmart is 2.85 times less risky than United Natural. It trades about 0.26 of its potential returns per unit of risk. United Natural Foods, is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,727  in United Natural Foods, on October 10, 2024 and sell it today you would earn a total of  1,542  from holding United Natural Foods, or generate 56.55% return on investment over 90 days.

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

Walmart  vs.  United Natural Foods,

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.

United Natural Foods,

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Natural Foods, are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, United Natural sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and United Natural

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

The idea behind Walmart and United Natural Foods, 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.