Correlation Between International Business and Walmart

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

By analyzing existing cross correlation between International Business Machines and Walmart Inc CDR, you can compare the effects of market volatilities on International Business and Walmart 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 International Business with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and Walmart.

Diversification Opportunities for International Business and Walmart

0.4

Correlation Coefficient

International Business  Walmart

Very weak diversification

The 3 months correlation between International and Walmart is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and Walmart Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart Inc CDR and International Business 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 International Business Machines are associated (or correlated) with Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart Inc CDR has no effect on the direction of International Business i.e., International Business and Walmart go up and down completely randomly.

Pair Corralation between International Business and Walmart

Assuming the 90 days trading horizon International Business is expected to generate 5.64 times less return on investment than Walmart. In addition to that, International Business is 1.45 times more volatile than Walmart Inc CDR. It trades about 0.02 of its total potential returns per unit of risk. Walmart Inc CDR is currently generating about 0.2 per unit of volatility. If you would invest  3,511  in Walmart Inc CDR on September 24, 2024 and sell it today you would earn a total of  491.00  from holding Walmart Inc CDR or generate 13.98% return on investment over 90 days.

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

International Business Machine  vs.  Walmart Inc CDR

International Business

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, International Business is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Walmart Inc CDR

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart Inc CDR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Walmart displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Business and Walmart

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

The idea behind International Business Machines and Walmart Inc CDR 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.