Correlation Between Walmart and General Cannabis

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

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

Diversification Opportunities for Walmart and General Cannabis

-0.51

Correlation Coefficient

Walmart  General Cannabis

Excellent diversification

The 3 months correlation between Walmart and General is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and General Cannabis Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Cannabis Corp 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 General Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Cannabis Corp has no effect on the direction of Walmart i.e., Walmart and General Cannabis go up and down completely randomly.

Pair Corralation between Walmart and General Cannabis

Considering the 90-day investment horizon Walmart is expected to generate 0.11 times more return on investment than General Cannabis. However, Walmart is 9.07 times less risky than General Cannabis. It trades about 0.53 of its potential returns per unit of risk. General Cannabis Corp is currently generating about -0.18 per unit of risk. If you would invest  8,245  in Walmart on September 3, 2024 and sell it today you would earn a total of  1,005  from holding Walmart or generate 12.19% return on investment over 90 days.

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

Walmart  vs.  General Cannabis Corp

Walmart

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

General Cannabis Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General Cannabis Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Walmart and General Cannabis

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

The idea behind Walmart and General Cannabis Corp 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.