Correlation Between Walmart and Ford

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

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

Diversification Opportunities for Walmart and Ford

0.76

Correlation Coefficient

Walmart  Ford

Poor diversification

The 3 months correlation between Walmart and Ford is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor 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 Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Walmart i.e., Walmart and Ford go up and down completely randomly.

Pair Corralation between Walmart and Ford

Considering the 90-day investment horizon Walmart is expected to under-perform the Ford. But the stock apears to be less risky and, when comparing its historical volatility, Walmart is 3.86 times less risky than Ford. The stock trades about -0.15 of its potential returns per unit of risk. The Ford Motor is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,230  in Ford Motor on January 19, 2024 and sell it today you would lose (26.00) from holding Ford Motor or give up 2.11% of portfolio value over 90 days.

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

Walmart  vs.  Ford Motor

Walmart

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Ford Motor

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Walmart and Ford

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

The idea behind Walmart and Ford Motor 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.