Correlation Between Loblaw Companies and Walmart
Can any of the company-specific risk be diversified away by investing in both Loblaw Companies 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 Loblaw Companies and Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Loblaw Companies Limited and Walmart Inc CDR, you can compare the effects of market volatilities on Loblaw Companies 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 Loblaw Companies with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loblaw Companies and Walmart.
Diversification Opportunities for Loblaw Companies and Walmart
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Loblaw and Walmart is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Loblaw Companies Limited 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 Loblaw Companies 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 Loblaw Companies Limited 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 Loblaw Companies i.e., Loblaw Companies and Walmart go up and down completely randomly.
Pair Corralation between Loblaw Companies and Walmart
Given the investment horizon of 90 days Loblaw Companies is expected to generate 1.93 times less return on investment than Walmart. But when comparing it to its historical volatility, Loblaw Companies Limited is 1.06 times less risky than Walmart. It trades about 0.12 of its potential returns per unit of risk. Walmart Inc CDR is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 3,479 in Walmart Inc CDR on September 26, 2024 and sell it today you would earn a total of 537.00 from holding Walmart Inc CDR or generate 15.44% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Loblaw Companies Limited vs. Walmart Inc CDR
Performance |
Timeline |
Loblaw Companies |
Walmart Inc CDR |
Loblaw Companies and Walmart Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Loblaw Companies and Walmart
The main advantage of trading using opposite Loblaw Companies and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loblaw Companies 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.Loblaw Companies vs. Metro Inc | Loblaw Companies vs. George Weston Limited | Loblaw Companies vs. Canadian Tire | Loblaw Companies vs. Dollarama |
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Check out your portfolio center.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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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