# Correlation Between Walmart and 3M

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Can any of the company-specific risk be diversified away by investing in both Walmart and 3M 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 3M into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and 3M Company, you can compare the effects of market volatilities on Walmart and 3M 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 3M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and 3M.

## Diversification Opportunities for Walmart and 3M

 0.01 Correlation Coefficient

### Significant diversification

The 3 months correlation between Walmart and 3M is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company 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 3M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3M Company has no effect on the direction of Walmart i.e., Walmart and 3M go up and down completely randomly.

## Pair Corralation between Walmart and 3M

Considering the 90-day investment horizon Walmart is expected to generate 83.73 times more return on investment than 3M. However, Walmart is 83.73 times more volatile than 3M Company. It trades about 0.2 of its potential returns per unit of risk. 3M Company is currently generating about -0.26 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 Period 3 Months [change] Direction Moves Together Strength Insignificant Accuracy 100.0% Values Daily Returns

## Walmart  vs.  3M Company

 Performance
 Timeline
 Walmart Correlation Profile

### 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 abnormal primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.
 Performance Backtest Predict
 3M Company Correlation Profile

### 0 of 100

 Low High
Very Weak
Over the last 90 days 3M Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
 Performance Backtest Predict

## Walmart and 3M Volatility Contrast

 Predicted Return Density
 Returns

## Pair Trading with Walmart and 3M

The main advantage of trading using opposite Walmart and 3M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, 3M 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 3M will offset losses from the drop in 3M's long position.
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The idea behind Walmart and 3M Company 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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