Correlation Between Walmart and Stitch Fix

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

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

Diversification Opportunities for Walmart and Stitch Fix

0.79

Correlation Coefficient

Walmart  Stitch Fix

Poor diversification

The 3 months correlation between Walmart and Stitch is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Stitch Fix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stitch Fix 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 Stitch Fix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stitch Fix has no effect on the direction of Walmart i.e., Walmart and Stitch Fix go up and down completely randomly.

Pair Corralation between Walmart and Stitch Fix

Assuming the 90 days trading horizon Walmart is expected to generate 1.87 times less return on investment than Stitch Fix. But when comparing it to its historical volatility, Walmart is 5.72 times less risky than Stitch Fix. It trades about 0.33 of its potential returns per unit of risk. Stitch Fix is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  321.00  in Stitch Fix on September 12, 2024 and sell it today you would earn a total of  109.00  from holding Stitch Fix or generate 33.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Walmart  vs.  Stitch Fix

Walmart

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Stitch Fix

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stitch Fix are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Stitch Fix reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Stitch Fix

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

The idea behind Walmart and Stitch Fix 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.