Correlation Between HP and Walmart

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

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

Diversification Opportunities for HP and Walmart

0.49

Correlation Coefficient

HP  Walmart

Very weak diversification

The 3 months correlation between HP and Walmart is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and HP 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 HP Inc 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 HP i.e., HP and Walmart go up and down completely randomly.

Pair Corralation between HP and Walmart

Considering the 90-day investment horizon HP Inc is expected to under-perform the Walmart. In addition to that, HP is 2.24 times more volatile than Walmart. It trades about -0.21 of its total potential returns per unit of risk. Walmart is currently generating about -0.21 per unit of volatility. If you would invest  6,125  in Walmart on January 20, 2024 and sell it today you would lose (172.00) from holding Walmart or give up 2.81% of portfolio value over 90 days.

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

HP Inc  vs.  Walmart

HP Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, HP is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Walmart

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with HP and Walmart

The main advantage of trading using opposite HP and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP 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 HP Inc 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.