Correlation Between Walmart and Snap On

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

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

Diversification Opportunities for Walmart and Snap On

0.31

Correlation Coefficient

Walmart  Snap On

Weak diversification

The 3 months correlation between Walmart and Snap is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Snap On in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snap On 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 Snap On. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snap On has no effect on the direction of Walmart i.e., Walmart and Snap On go up and down completely randomly.

Pair Corralation between Walmart and Snap On

Considering the 90-day investment horizon Walmart is expected to generate 0.74 times more return on investment than Snap On. However, Walmart is 1.35 times less risky than Snap On. It trades about 0.08 of its potential returns per unit of risk. Snap On is currently generating about 0.01 per unit of risk. If you would invest  5,274  in Walmart on January 24, 2024 and sell it today you would earn a total of  740.00  from holding Walmart or generate 14.03% 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.  Snap On

Walmart

Risk-Adjusted Performance

18 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Snap On

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Snap On has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Snap On is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Walmart and Snap On

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

The idea behind Walmart and Snap On 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.