Correlation Between PriceSmart and Walmart
Can any of the company-specific risk be diversified away by investing in both PriceSmart and Walmart 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 PriceSmart and Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PriceSmart and Walmart, you can compare the effects of market volatilities on PriceSmart and Walmart 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 PriceSmart with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of PriceSmart and Walmart.
Diversification Opportunities for PriceSmart and Walmart
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PriceSmart and Walmart is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding PriceSmart and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and PriceSmart 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 PriceSmart are associated (or correlated) with Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of PriceSmart i.e., PriceSmart and Walmart go up and down completely randomly.
Pair Corralation between PriceSmart and Walmart
Given the investment horizon of 90 days PriceSmart is expected to generate 2.02 times more return on investment than Walmart. However, PriceSmart is 2.02 times more volatile than Walmart. It trades about 0.01 of its potential returns per unit of risk. Walmart is currently generating about -0.07 per unit of risk. If you would invest 8,075 in PriceSmart on January 25, 2024 and sell it today you would earn a total of 16.00 from holding PriceSmart or generate 0.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PriceSmart vs. Walmart
Performance |
| Timeline |
| PriceSmart |
| Walmart |
PriceSmart and Walmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PriceSmart and Walmart
The main advantage of trading using opposite PriceSmart and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PriceSmart position performs unexpectedly, Walmart 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 Walmart will offset losses from the drop in Walmart's long position.| PriceSmart vs. Wal Mart de | PriceSmart vs. Pan Pacific International | PriceSmart vs. Dollarama | PriceSmart vs. Dollar General |
| Walmart vs. Costco Wholesale Corp | Walmart vs. Dollar Tree | Walmart vs. BJs Wholesale Club | Walmart vs. Big Lots |
Check out your portfolio center.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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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