Correlation Between Walmart and State Street

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

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

Diversification Opportunities for Walmart and State Street

0.75

Correlation Coefficient

Walmart  State Street

Poor diversification

The 3 months correlation between Walmart and State is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and State Street Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Target 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Target has no effect on the direction of Walmart i.e., Walmart and State Street go up and down completely randomly.

Pair Corralation between Walmart and State Street

Considering the 90-day investment horizon Walmart is expected to generate 1.56 times more return on investment than State Street. However, Walmart is 1.56 times more volatile than State Street Target. It trades about 0.22 of its potential returns per unit of risk. State Street Target is currently generating about 0.12 per unit of risk. If you would invest  5,108  in Walmart on September 14, 2024 and sell it today you would earn a total of  4,317  from holding Walmart or generate 84.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.63%
Values	Daily Returns

Walmart  vs.  State Street Target

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.

State Street Target

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Target are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, State Street is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Walmart and State Street

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

The idea behind Walmart and State Street Target 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.