Correlation Between Walmart and Roche Holding

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

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

Diversification Opportunities for Walmart and Roche Holding

-0.82

Correlation Coefficient

Walmart  Roche Holding

Pay attention - limited upside

The 3 months correlation between Walmart and Roche is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Roche Holding Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roche Holding 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 Roche Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roche Holding has no effect on the direction of Walmart i.e., Walmart and Roche Holding go up and down completely randomly.

Pair Corralation between Walmart and Roche Holding

Considering the 90-day investment horizon Walmart is expected to generate 0.76 times more return on investment than Roche Holding. However, Walmart is 1.32 times less risky than Roche Holding. It trades about 0.27 of its potential returns per unit of risk. Roche Holding Ltd is currently generating about -0.13 per unit of risk. If you would invest  7,724  in Walmart on September 4, 2024 and sell it today you would earn a total of  1,540  from holding Walmart or generate 19.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Walmart  vs.  Roche Holding Ltd

Walmart

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 21 (%) 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.

Roche Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roche Holding Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Walmart and Roche Holding

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

The idea behind Walmart and Roche Holding Ltd 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.