Correlation Between Walmart and Legg Mason

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

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

Diversification Opportunities for Walmart and Legg Mason

-0.45

Correlation Coefficient

Walmart  Legg Mason

Very good diversification

The 3 months correlation between Walmart and Legg is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Legg Mason Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Partners 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 Legg Mason. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legg Mason Partners has no effect on the direction of Walmart i.e., Walmart and Legg Mason go up and down completely randomly.

Pair Corralation between Walmart and Legg Mason

Considering the 90-day investment horizon Walmart is expected to generate 0.8 times more return on investment than Legg Mason. However, Walmart is 1.25 times less risky than Legg Mason. It trades about -0.14 of its potential returns per unit of risk. Legg Mason Partners is currently generating about -0.13 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	Very Weak
Accuracy	95.0%
Values	Daily Returns

Walmart  vs.  Legg Mason Partners

Walmart

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 15 (%) 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.

Legg Mason Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Legg Mason Partners has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's primary indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Walmart and Legg Mason

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

The idea behind Walmart and Legg Mason Partners 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.