Correlation Between Walmart and Warehouses

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

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

Diversification Opportunities for Walmart and Warehouses

-0.87

Correlation Coefficient

Walmart  Warehouses

Pay attention - limited upside

The 3 months correlation between Walmart and Warehouses is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Warehouses De Pauw in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warehouses De Pauw 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 Warehouses. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warehouses De Pauw has no effect on the direction of Walmart i.e., Walmart and Warehouses go up and down completely randomly.

Pair Corralation between Walmart and Warehouses

Assuming the 90 days horizon Walmart is expected to generate 0.84 times more return on investment than Warehouses. However, Walmart is 1.19 times less risky than Warehouses. It trades about 0.26 of its potential returns per unit of risk. Warehouses De Pauw is currently generating about -0.25 per unit of risk. If you would invest  7,107  in Walmart on September 26, 2024 and sell it today you would earn a total of  1,566  from holding Walmart or generate 22.03% return on investment over 90 days.

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

Walmart  vs.  Warehouses De Pauw

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 nearly uncertain basic indicators, Walmart reported solid returns over the last few months and may actually be approaching a breakup point.

Warehouses De Pauw

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Warehouses De Pauw has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Walmart and Warehouses

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

The idea behind Walmart and Warehouses De Pauw 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.