Correlation Between Walmart and One Step

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

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

Diversification Opportunities for Walmart and One Step

-0.58

Correlation Coefficient

Walmart  One Step

Excellent diversification

The 3 months correlation between Walmart and One is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and One Step Vending in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Step Vending 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 One Step. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One Step Vending has no effect on the direction of Walmart i.e., Walmart and One Step go up and down completely randomly.

Pair Corralation between Walmart and One Step

Considering the 90-day investment horizon Walmart is expected to generate 6.47 times less return on investment than One Step. But when comparing it to its historical volatility, Walmart is 15.29 times less risky than One Step. It trades about 0.14 of its potential returns per unit of risk. One Step Vending is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.81  in One Step Vending on September 15, 2024 and sell it today you would lose (0.55) from holding One Step Vending or give up 67.9% of portfolio value over 90 days.

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

Walmart  vs.  One Step Vending

Walmart

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 18 (%) 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.

One Step Vending

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in One Step Vending are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, One Step disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and One Step

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

The idea behind Walmart and One Step Vending 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.