Correlation Between Walmart and Coca Cola
Can any of the company-specific risk be diversified away by investing in both Walmart and Coca Cola 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 Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and The Coca Cola, you can compare the effects of market volatilities on Walmart and Coca Cola 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 Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Coca Cola.
Diversification Opportunities for Walmart and Coca Cola
Weak diversification
The 3 months correlation between Walmart and Coca is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola has no effect on the direction of Walmart i.e., Walmart and Coca Cola go up and down completely randomly.
Pair Corralation between Walmart and Coca Cola
Considering the 90-day investment horizon Walmart is expected to generate 1.32 times more return on investment than Coca Cola. However, Walmart is 1.32 times more volatile than The Coca Cola. It trades about 0.03 of its potential returns per unit of risk. The Coca Cola is currently generating about -0.01 per unit of risk. If you would invest 5,052 in Walmart on January 18, 2024 and sell it today you would earn a total of 932.00 from holding Walmart or generate 18.45% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Walmart vs. The Coca Cola
Performance |
Timeline |
Walmart |
Coca Cola |
Walmart and Coca Cola Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Walmart and Coca Cola
The main advantage of trading using opposite Walmart and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Coca Cola 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 Coca Cola will offset losses from the drop in Coca Cola's long position.Walmart vs. Costco Wholesale Corp | Walmart vs. Dollar Tree | Walmart vs. BJs Wholesale Club | Walmart vs. Big Lots |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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