Correlation Between Walmart and TMX Group

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

Diversification Opportunities for Walmart and TMX Group

0.68

Correlation Coefficient

Walmart  TMX Group

Poor diversification

The 3 months correlation between Walmart and TMX is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Walmart Inc CDR and TMX Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMX Group Limited 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 TMX Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMX Group Limited has no effect on the direction of Walmart i.e., Walmart and TMX Group go up and down completely randomly.

Pair Corralation between Walmart and TMX Group

Assuming the 90 days trading horizon Walmart Inc CDR is expected to generate 1.32 times more return on investment than TMX Group. However, Walmart is 1.32 times more volatile than TMX Group Limited. It trades about 0.28 of its potential returns per unit of risk. TMX Group Limited is currently generating about 0.09 per unit of risk. If you would invest  3,369  in Walmart Inc CDR on August 31, 2024 and sell it today you would earn a total of  677.00  from holding Walmart Inc CDR or generate 20.09% return on investment over 90 days.

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

Walmart Inc CDR  vs.  TMX Group Limited

Walmart Inc CDR

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart Inc CDR are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Walmart displayed solid returns over the last few months and may actually be approaching a breakup point.

TMX Group Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TMX Group Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, TMX Group is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Walmart and TMX Group

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

The idea behind Walmart Inc CDR and TMX Group Limited 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.