Correlation Between Walmart and International Business

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

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

Diversification Opportunities for Walmart and International Business

0.63

Correlation Coefficient

Walmart  International Business

Poor diversification

The 3 months correlation between Walmart and International is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Walmart i.e., Walmart and International Business go up and down completely randomly.

Pair Corralation between Walmart and International Business

Assuming the 90 days trading horizon Walmart is expected to generate 0.78 times more return on investment than International Business. However, Walmart is 1.28 times less risky than International Business. It trades about 0.21 of its potential returns per unit of risk. International Business Machines is currently generating about 0.05 per unit of risk. If you would invest  158,648  in Walmart on September 28, 2024 and sell it today you would earn a total of  28,182  from holding Walmart or generate 17.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Walmart  vs.  International Business Machine

Walmart

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 16 (%) 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.

International Business

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, International Business is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Walmart and International Business

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

The idea behind Walmart and International Business Machines 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.