Correlation Between Walmart and Moderna

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

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

Diversification Opportunities for Walmart and Moderna

-0.8

Correlation Coefficient

Walmart  Moderna

Pay attention - limited upside

The 3 months correlation between Walmart and Moderna is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Moderna in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderna 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 Moderna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderna has no effect on the direction of Walmart i.e., Walmart and Moderna go up and down completely randomly.

Pair Corralation between Walmart and Moderna

Assuming the 90 days trading horizon Walmart is expected to generate 0.42 times more return on investment than Moderna. However, Walmart is 2.37 times less risky than Moderna. It trades about 0.26 of its potential returns per unit of risk. Moderna is currently generating about -0.15 per unit of risk. If you would invest  2,746  in Walmart on September 24, 2024 and sell it today you would earn a total of  740.00  from holding Walmart or generate 26.95% return on investment over 90 days.

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

Walmart  vs.  Moderna

Walmart

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Walmart sustained solid returns over the last few months and may actually be approaching a breakup point.

Moderna

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Moderna has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Walmart and Moderna

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

The idea behind Walmart and Moderna 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.