Correlation Between Walmart and Tate Lyle

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

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

Diversification Opportunities for Walmart and Tate Lyle

-0.44

Correlation Coefficient

Walmart  Tate Lyle

Very good diversification

The 3 months correlation between Walmart and Tate is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Tate Lyle PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tate Lyle PLC 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 Tate Lyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tate Lyle PLC has no effect on the direction of Walmart i.e., Walmart and Tate Lyle go up and down completely randomly.

Pair Corralation between Walmart and Tate Lyle

Considering the 90-day investment horizon Walmart is expected to generate 3.65 times less return on investment than Tate Lyle. But when comparing it to its historical volatility, Walmart is 1.85 times less risky than Tate Lyle. It trades about 0.02 of its potential returns per unit of risk. Tate Lyle PLC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,131  in Tate Lyle PLC on January 30, 2024 and sell it today you would earn a total of  31.00  from holding Tate Lyle PLC or generate 0.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Walmart  vs.  Tate Lyle PLC

Walmart

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 13 (%) 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.

Tate Lyle PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tate Lyle PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Tate Lyle 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 Tate Lyle

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

The idea behind Walmart and Tate Lyle PLC 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.