Correlation Between Walmart and General Electric

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Can any of the company-specific risk be diversified away by investing in both Walmart and General Electric 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 General Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and General Electric, you can compare the effects of market volatilities on Walmart and General Electric 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 General Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and General Electric.

Diversification Opportunities for Walmart and General Electric

0.04
  Correlation Coefficient

Significant diversification

The 3 months correlation between Walmart and General is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and General Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Electric 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 General Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Electric has no effect on the direction of Walmart i.e., Walmart and General Electric go up and down completely randomly.

Pair Corralation between Walmart and General Electric

Considering the 90-day investment horizon Walmart is expected to generate 80.33 times more return on investment than General Electric. However, Walmart is 80.33 times more volatile than General Electric. It trades about 0.2 of its potential returns per unit of risk. General Electric is currently generating about 0.93 per unit of risk. If you would invest  5,610  in Walmart on December 3, 2023 and sell it today you would earn a total of  266.00  from holding Walmart or generate 4.74% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Walmart  vs.  General Electric

 Performance 
       Timeline  
Walmart 

Risk-Adjusted Performance

21 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.
General Electric 

Risk-Adjusted Performance

32 of 100

 
Low
 
High
Very Strong
Compared to the overall equity markets, risk-adjusted returns on investments in General Electric are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, General Electric exhibited solid returns over the last few months and may actually be approaching a breakup point.

Walmart and General Electric Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Walmart and General Electric

The main advantage of trading using opposite Walmart and General Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, General Electric 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 General Electric will offset losses from the drop in General Electric's long position.
The idea behind Walmart and General Electric 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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