Correlation Between Walmart and Tattooed Chef

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

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

Diversification Opportunities for Walmart and Tattooed Chef

-0.79

Correlation Coefficient

Walmart  Tattooed Chef

Pay attention - limited upside

The 3 months correlation between Walmart and Tattooed is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Tattooed Chef in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tattooed Chef 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 Tattooed Chef. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tattooed Chef has no effect on the direction of Walmart i.e., Walmart and Tattooed Chef go up and down completely randomly.

Pair Corralation between Walmart and Tattooed Chef

Considering the 90-day investment horizon Walmart is expected to generate 0.12 times more return on investment than Tattooed Chef. However, Walmart is 8.07 times less risky than Tattooed Chef. It trades about 0.14 of its potential returns per unit of risk. Tattooed Chef is currently generating about -0.17 per unit of risk. If you would invest  4,769  in Walmart on September 4, 2024 and sell it today you would earn a total of  4,582  from holding Walmart or generate 96.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	30.51%
Values	Daily Returns

Walmart  vs.  Tattooed Chef

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.

Tattooed Chef

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tattooed Chef has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Tattooed Chef is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Walmart and Tattooed Chef

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

The idea behind Walmart and Tattooed Chef 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.