Correlation Between Walmart and REYNOLDS

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

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

Diversification Opportunities for Walmart and REYNOLDS

0.05

Correlation Coefficient

Walmart  REYNOLDS

Significant diversification

The 3 months correlation between Walmart and REYNOLDS is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and REYNOLDS AMERN INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REYNOLDS AMERN INC 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 REYNOLDS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REYNOLDS AMERN INC has no effect on the direction of Walmart i.e., Walmart and REYNOLDS go up and down completely randomly.

Pair Corralation between Walmart and REYNOLDS

Considering the 90-day investment horizon Walmart is expected to generate 9.24 times more return on investment than REYNOLDS. However, Walmart is 9.24 times more volatile than REYNOLDS AMERN INC. It trades about 0.14 of its potential returns per unit of risk. REYNOLDS AMERN INC is currently generating about -0.13 per unit of risk. If you would invest  9,000  in Walmart on December 2, 2024 and sell it today you would earn a total of  861.00  from holding Walmart or generate 9.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.56%
Values	Daily Returns

Walmart  vs.  REYNOLDS AMERN INC

Walmart

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in April 2025.

REYNOLDS AMERN INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days REYNOLDS AMERN INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, REYNOLDS is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Walmart and REYNOLDS

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

The idea behind Walmart and REYNOLDS AMERN INC 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.