Correlation Between Walmart and Healthy Choice

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

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

Diversification Opportunities for Walmart and Healthy Choice

-0.87

Correlation Coefficient

Walmart  Healthy Choice

Pay attention - limited upside

The 3 months correlation between Walmart and Healthy is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Healthy Choice Wellness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthy Choice Wellness 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 Healthy Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthy Choice Wellness has no effect on the direction of Walmart i.e., Walmart and Healthy Choice go up and down completely randomly.

Pair Corralation between Walmart and Healthy Choice

Considering the 90-day investment horizon Walmart is expected to generate 0.1 times more return on investment than Healthy Choice. However, Walmart is 10.15 times less risky than Healthy Choice. It trades about -0.14 of its potential returns per unit of risk. Healthy Choice Wellness is currently generating about -0.03 per unit of risk. If you would invest  9,362  in Walmart on October 8, 2024 and sell it today you would lose (284.00) from holding Walmart or give up 3.03% of portfolio value over 90 days.

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

Walmart  vs.  Healthy Choice Wellness

Walmart

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Healthy Choice Wellness

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Healthy Choice Wellness has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Walmart and Healthy Choice

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

The idea behind Walmart and Healthy Choice Wellness 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.