Correlation Between Wal Mart and Target

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

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

Diversification Opportunities for Wal Mart and Target

0.32

Correlation Coefficient

Wal Mart  Target

Weak diversification

The 3 months correlation between Wal and Target is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Wal Mart de and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target and Wal Mart 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 Wal Mart de are associated (or correlated) with Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of Wal Mart i.e., Wal Mart and Target go up and down completely randomly.

Pair Corralation between Wal Mart and Target

Assuming the 90 days horizon Wal Mart de is expected to generate 1.5 times more return on investment than Target. However, Wal Mart is 1.5 times more volatile than Target. It trades about 0.05 of its potential returns per unit of risk. Target is currently generating about -0.21 per unit of risk. If you would invest  272.00  in Wal Mart de on December 27, 2024 and sell it today you would earn a total of  18.00  from holding Wal Mart de or generate 6.62% return on investment over 90 days.

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

Wal Mart de  vs.  Target

Wal Mart de

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wal Mart de are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Wal Mart may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Target

Risk-Adjusted Performance

Very Weak

Over the last 90 days Target has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Wal Mart and Target

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

The idea behind Wal Mart de and Target 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.