Correlation Between Walmart and Citigroup

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

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

Diversification Opportunities for Walmart and Citigroup

0.93

Correlation Coefficient

Walmart  Citigroup

Almost no diversification

The 3 months correlation between Walmart and Citigroup is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup 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 Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of Walmart i.e., Walmart and Citigroup go up and down completely randomly.

Pair Corralation between Walmart and Citigroup

Assuming the 90 days trading horizon Walmart is expected to generate 1.16 times less return on investment than Citigroup. But when comparing it to its historical volatility, Walmart is 1.58 times less risky than Citigroup. It trades about 0.2 of its potential returns per unit of risk. Citigroup is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  120,276  in Citigroup on September 26, 2024 and sell it today you would earn a total of  22,625  from holding Citigroup or generate 18.81% return on investment over 90 days.

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

Walmart  vs.  Citigroup

Walmart

Risk-Adjusted Performance

15 of 100

Good

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

Citigroup

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Citigroup showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Citigroup

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

The idea behind Walmart and Citigroup 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.