Correlation Between Walmart and Kits Eyecare

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

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

Diversification Opportunities for Walmart and Kits Eyecare

-0.41

Correlation Coefficient

Walmart  Kits Eyecare

Very good diversification

The 3 months correlation between Walmart and Kits is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and Kits Eyecare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kits Eyecare 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 Inc CDR are associated (or correlated) with Kits Eyecare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kits Eyecare has no effect on the direction of Walmart i.e., Walmart and Kits Eyecare go up and down completely randomly.

Pair Corralation between Walmart and Kits Eyecare

Assuming the 90 days trading horizon Walmart Inc CDR is expected to under-perform the Kits Eyecare. But the stock apears to be less risky and, when comparing its historical volatility, Walmart Inc CDR is 1.51 times less risky than Kits Eyecare. The stock trades about -0.04 of its potential returns per unit of risk. The Kits Eyecare is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  837.00  in Kits Eyecare on December 30, 2024 and sell it today you would earn a total of  349.00  from holding Kits Eyecare or generate 41.7% return on investment over 90 days.

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

Walmart Inc CDR  vs.  Kits Eyecare

Walmart Inc CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walmart Inc CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Walmart is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Kits Eyecare

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kits Eyecare are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Kits Eyecare displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Kits Eyecare

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

The idea behind Walmart Inc CDR and Kits Eyecare 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.