Correlation Between Walmart and United States

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

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

Diversification Opportunities for Walmart and United States

-0.39

Correlation Coefficient

Walmart  United States

Very good diversification

The 3 months correlation between Walmart and United is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of Walmart i.e., Walmart and United States go up and down completely randomly.

Pair Corralation between Walmart and United States

Assuming the 90 days trading horizon Walmart is expected to generate 0.32 times more return on investment than United States. However, Walmart is 3.08 times less risky than United States. It trades about 0.2 of its potential returns per unit of risk. United States Steel is currently generating about -0.18 per unit of risk. If you would invest  542,000  in Walmart on September 15, 2024 and sell it today you would earn a total of  28,000  from holding Walmart or generate 5.17% return on investment over 90 days.

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

Walmart  vs.  United States Steel

Walmart

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Walmart is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Walmart and United States

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

The idea behind Walmart and United States Steel 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.