Correlation Between MTY Food and Walmart

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

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

Diversification Opportunities for MTY Food and Walmart

0.73

Correlation Coefficient

MTY Food  Walmart

Poor diversification

The 3 months correlation between MTY and Walmart is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding MTY Food Group 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 MTY Food 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 MTY Food Group 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 MTY Food i.e., MTY Food and Walmart go up and down completely randomly.

Pair Corralation between MTY Food and Walmart

Assuming the 90 days trading horizon MTY Food Group is expected to under-perform the Walmart. But the stock apears to be less risky and, when comparing its historical volatility, MTY Food Group is 1.04 times less risky than Walmart. The stock trades about -0.05 of its potential returns per unit of risk. The Walmart Inc CDR is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,882  in Walmart Inc CDR on September 26, 2024 and sell it today you would earn a total of  134.00  from holding Walmart Inc CDR or generate 3.45% return on investment over 90 days.

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

MTY Food Group  vs.  Walmart Inc CDR

MTY Food Group

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MTY Food Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, MTY Food 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

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart Inc CDR are ranked lower than 16 (%) 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 MTY Food and Walmart

The main advantage of trading using opposite MTY Food and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTY Food 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 MTY Food Group 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.