Correlation Between Walmart and Dollarama

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

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

Diversification Opportunities for Walmart and Dollarama

-0.36

Correlation Coefficient

Walmart  Dollarama

Very good diversification

The 3 months correlation between Walmart and Dollarama is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Dollarama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollarama 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 Dollarama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dollarama has no effect on the direction of Walmart i.e., Walmart and Dollarama go up and down completely randomly.

Pair Corralation between Walmart and Dollarama

Considering the 90-day investment horizon Walmart is expected to under-perform the Dollarama. In addition to that, Walmart is 1.4 times more volatile than Dollarama. It trades about -0.05 of its total potential returns per unit of risk. Dollarama is currently generating about 0.13 per unit of volatility. If you would invest  9,649  in Dollarama on December 30, 2024 and sell it today you would earn a total of  995.00  from holding Dollarama or generate 10.31% return on investment over 90 days.

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

Walmart  vs.  Dollarama

Walmart

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walmart has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Walmart is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Dollarama

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dollarama are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Dollarama may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Walmart and Dollarama

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

The idea behind Walmart and Dollarama 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.