Correlation Between Walmart and PROCTER

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

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

Diversification Opportunities for Walmart and PROCTER

-0.75

Correlation Coefficient

Walmart  PROCTER

Pay attention - limited upside

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

Pair Corralation between Walmart and PROCTER

Considering the 90-day investment horizon Walmart is expected to generate 1.19 times more return on investment than PROCTER. However, Walmart is 1.19 times more volatile than PROCTER GAMBLE CO. It trades about 0.26 of its potential returns per unit of risk. PROCTER GAMBLE CO is currently generating about -0.04 per unit of risk. If you would invest  7,966  in Walmart on September 12, 2024 and sell it today you would earn a total of  1,530  from holding Walmart or generate 19.21% return on investment over 90 days.

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

Walmart  vs.  PROCTER GAMBLE CO

Walmart

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 20 (%) 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.

PROCTER GAMBLE CO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PROCTER GAMBLE CO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PROCTER 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 PROCTER

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

The idea behind Walmart and PROCTER GAMBLE CO 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.