Correlation Between Stanley Black and Walmart

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

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

Diversification Opportunities for Stanley Black and Walmart

0.03

Correlation Coefficient

Stanley Black  Walmart

Significant diversification

The 3 months correlation between Stanley and Walmart is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Stanley Black Decker and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Stanley Black 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 Stanley Black Decker 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 Stanley Black i.e., Stanley Black and Walmart go up and down completely randomly.

Pair Corralation between Stanley Black and Walmart

Considering the 90-day investment horizon Stanley Black Decker is expected to under-perform the Walmart. In addition to that, Stanley Black is 1.8 times more volatile than Walmart. It trades about -0.01 of its total potential returns per unit of risk. Walmart is currently generating about 0.04 per unit of volatility. If you would invest  4,915  in Walmart on January 20, 2024 and sell it today you would earn a total of  1,038  from holding Walmart or generate 21.12% return on investment over 90 days.

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

Stanley Black Decker  vs.  Walmart

Stanley Black Decker

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stanley Black Decker has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Stanley Black is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional 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 Stanley Black and Walmart

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

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..