Correlation Between Albertsons Companies and Walmart

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

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

Diversification Opportunities for Albertsons Companies and Walmart

-0.69

Correlation Coefficient

Albertsons Companies  Walmart

Excellent diversification

The 3 months correlation between Albertsons and Walmart is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Albertsons Companies and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Albertsons Companies 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 Albertsons Companies 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 Albertsons Companies i.e., Albertsons Companies and Walmart go up and down completely randomly.

Pair Corralation between Albertsons Companies and Walmart

Considering the 90-day investment horizon Albertsons Companies is expected to under-perform the Walmart. But the stock apears to be less risky and, when comparing its historical volatility, Albertsons Companies is 1.19 times less risky than Walmart. The stock trades about -0.03 of its potential returns per unit of risk. The Walmart is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  5,274  in Walmart on January 24, 2024 and sell it today you would earn a total of  740.00  from holding Walmart or generate 14.03% return on investment over 90 days.

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

Albertsons Companies  vs.  Walmart

Albertsons Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Albertsons Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Walmart

Risk-Adjusted Performance

18 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Albertsons Companies and Walmart

The main advantage of trading using opposite Albertsons Companies and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Albertsons Companies 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.

The idea behind Albertsons Companies and Walmart 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 CEOs Directory module to screen CEOs from public companies around the world.