Correlation Between Walmart and Weis Markets

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

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

Diversification Opportunities for Walmart and Weis Markets

-0.37

Correlation Coefficient

Walmart  Weis Markets

Very good diversification

The 3 months correlation between Walmart and Weis is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Weis Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weis Markets 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 Weis Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weis Markets has no effect on the direction of Walmart i.e., Walmart and Weis Markets go up and down completely randomly.

Pair Corralation between Walmart and Weis Markets

Considering the 90-day investment horizon Walmart is expected to under-perform the Weis Markets. But the stock apears to be less risky and, when comparing its historical volatility, Walmart is 1.01 times less risky than Weis Markets. The stock trades about -0.04 of its potential returns per unit of risk. The Weis Markets is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  6,718  in Weis Markets on December 28, 2024 and sell it today you would earn a total of  1,063  from holding Weis Markets or generate 15.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Walmart  vs.  Weis Markets

Walmart

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walmart has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Walmart is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Weis Markets

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Weis Markets are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady primary indicators, Weis Markets disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Weis Markets

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

The idea behind Walmart and Weis Markets 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.