Correlation Between Wal Mart and Big Lots

Can any of the company-specific risk be diversified away by investing in both Wal Mart and Big Lots 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 Big Lots 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 Big Lots, you can compare the effects of market volatilities on Wal Mart and Big Lots 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 Big Lots. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wal Mart and Big Lots.

Diversification Opportunities for Wal Mart and Big Lots

0.54

Correlation Coefficient

Wal Mart  Big Lots

Very weak diversification

The 3 months correlation between Wal and Big is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Wal Mart de and Big Lots in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Lots 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 Big Lots. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Lots has no effect on the direction of Wal Mart i.e., Wal Mart and Big Lots go up and down completely randomly.

Pair Corralation between Wal Mart and Big Lots

Assuming the 90 days horizon Wal Mart de is expected to generate 0.08 times more return on investment than Big Lots. However, Wal Mart de is 12.78 times less risky than Big Lots. It trades about -0.13 of its potential returns per unit of risk. Big Lots is currently generating about -0.2 per unit of risk. If you would invest  3,138  in Wal Mart de on August 30, 2024 and sell it today you would lose (498.00) from holding Wal Mart de or give up 15.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	25.4%
Values	Daily Returns

Wal Mart de  vs.  Big Lots

Wal Mart de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wal Mart de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Big Lots

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Lots has generated negative risk-adjusted returns adding no value to investors with long positions. Despite sluggish performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Wal Mart and Big Lots

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

The idea behind Wal Mart de and Big Lots 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.