Correlation Between Walmart and Philip Morris

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

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

Diversification Opportunities for Walmart and Philip Morris

0.09

Correlation Coefficient

Walmart  Philip Morris

Significant diversification

The 3 months correlation between Walmart and Philip is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Philip Morris International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philip Morris Intern 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 Philip Morris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philip Morris Intern has no effect on the direction of Walmart i.e., Walmart and Philip Morris go up and down completely randomly.

Pair Corralation between Walmart and Philip Morris

Considering the 90-day investment horizon Walmart is expected to generate 1.04 times more return on investment than Philip Morris. However, Walmart is 1.04 times more volatile than Philip Morris International. It trades about 0.08 of its potential returns per unit of risk. Philip Morris International is currently generating about -0.03 per unit of risk. If you would invest  5,223  in Walmart on January 17, 2024 and sell it today you would earn a total of  770.00  from holding Walmart or generate 14.74% return on investment over 90 days.

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

Walmart  vs.  Philip Morris International

Walmart

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Philip Morris Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Philip Morris International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Philip Morris is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Walmart and Philip Morris

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

The idea behind Walmart and Philip Morris International 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.