Correlation Between Walmart and Essity AB

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

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

Diversification Opportunities for Walmart and Essity AB

-0.71

Correlation Coefficient

Walmart  Essity AB

Pay attention - limited upside

The 3 months correlation between Walmart and Essity is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Essity AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essity AB 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 Essity AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essity AB has no effect on the direction of Walmart i.e., Walmart and Essity AB go up and down completely randomly.

Pair Corralation between Walmart and Essity AB

Considering the 90-day investment horizon Walmart is expected to generate 0.78 times more return on investment than Essity AB. However, Walmart is 1.28 times less risky than Essity AB. It trades about 0.13 of its potential returns per unit of risk. Essity AB is currently generating about -0.22 per unit of risk. If you would invest  9,279  in Walmart on October 27, 2024 and sell it today you would earn a total of  197.00  from holding Walmart or generate 2.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Walmart  vs.  Essity AB

Walmart

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Essity AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Walmart and Essity AB

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

The idea behind Walmart and Essity AB 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.