Correlation Between Walmart and Home Depot
Can any of the company-specific risk be diversified away by investing in both Walmart and Home Depot 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 Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Home Depot, you can compare the effects of market volatilities on Walmart and Home Depot 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 Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Home Depot.
Diversification Opportunities for Walmart and Home Depot
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Walmart and Home is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot 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 Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Walmart i.e., Walmart and Home Depot go up and down completely randomly.
Pair Corralation between Walmart and Home Depot
Considering the 90-day investment horizon Walmart is expected to generate 1.15 times more return on investment than Home Depot. However, Walmart is 1.15 times more volatile than Home Depot. It trades about 0.08 of its potential returns per unit of risk. Home Depot is currently generating about -0.08 per unit of risk. If you would invest 9,244 in Walmart on December 1, 2024 and sell it today you would earn a total of 617.00 from holding Walmart or generate 6.67% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Walmart vs. Home Depot
Performance |
Timeline |
Walmart |
Home Depot |
Walmart and Home Depot Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Walmart and Home Depot
The main advantage of trading using opposite Walmart and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.Walmart vs. Aquagold International | Walmart vs. Thrivent High Yield | Walmart vs. Morningstar Unconstrained Allocation | Walmart vs. Via Renewables |
Home Depot vs. Floor Decor Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Lowes Companies |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
Other Complementary Tools
Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |