Correlation Between Walmart and Occidental

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

By analyzing existing cross correlation between Walmart and Occidental Petroleum 44, you can compare the effects of market volatilities on Walmart and Occidental 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 Occidental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Occidental.

Diversification Opportunities for Walmart and Occidental

-0.46

Correlation Coefficient

Walmart  Occidental

Very good diversification

The 3 months correlation between Walmart and Occidental is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Occidental Petroleum 44 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Occidental Petroleum 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 Occidental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Occidental Petroleum has no effect on the direction of Walmart i.e., Walmart and Occidental go up and down completely randomly.

Pair Corralation between Walmart and Occidental

Considering the 90-day investment horizon Walmart is expected to generate 2.15 times less return on investment than Occidental. But when comparing it to its historical volatility, Walmart is 3.14 times less risky than Occidental. It trades about 0.16 of its potential returns per unit of risk. Occidental Petroleum 44 is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  7,406  in Occidental Petroleum 44 on October 23, 2024 and sell it today you would earn a total of  1,169  from holding Occidental Petroleum 44 or generate 15.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	75.0%
Values	Daily Returns

Walmart  vs.  Occidental Petroleum 44

Walmart

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Occidental Petroleum

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Occidental Petroleum 44 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Occidental sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Occidental

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

The idea behind Walmart and Occidental Petroleum 44 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.