Correlation Between Walmart and ATT

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

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

Diversification Opportunities for Walmart and ATT

0.52

Correlation Coefficient

Walmart  ATT

Very weak diversification

The 3 months correlation between Walmart and ATT is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc 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 ATT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATT Inc has no effect on the direction of Walmart i.e., Walmart and ATT go up and down completely randomly.

Pair Corralation between Walmart and ATT

Assuming the 90 days trading horizon Walmart is expected to generate 0.8 times more return on investment than ATT. However, Walmart is 1.25 times less risky than ATT. It trades about -0.02 of its potential returns per unit of risk. ATT Inc is currently generating about -0.13 per unit of risk. If you would invest  191,178  in Walmart on October 12, 2024 and sell it today you would lose (1,179) from holding Walmart or give up 0.62% of portfolio value over 90 days.

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

Walmart  vs.  ATT Inc

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. In spite of fairly unfluctuating basic indicators, Walmart showed solid returns over the last few months and may actually be approaching a breakup point.

ATT Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, ATT may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Walmart and ATT

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

The idea behind Walmart and ATT Inc 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.