Correlation Between United States and Walmart

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

By analyzing existing cross correlation between United States Steel and Walmart, you can compare the effects of market volatilities on United States and Walmart 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 United States with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Walmart.

Diversification Opportunities for United States and Walmart

-0.68

Correlation Coefficient

United States  Walmart

Excellent diversification

The 3 months correlation between United and Walmart is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and United States 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 United States Steel are associated (or correlated) with Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of United States i.e., United States and Walmart go up and down completely randomly.

Pair Corralation between United States and Walmart

Taking into account the 90-day investment horizon United States Steel is expected to generate 3.59 times more return on investment than Walmart. However, United States is 3.59 times more volatile than Walmart. It trades about 0.09 of its potential returns per unit of risk. Walmart is currently generating about 0.09 per unit of risk. If you would invest  2,112  in United States Steel on January 19, 2024 and sell it today you would earn a total of  1,782  from holding United States Steel or generate 84.38% return on investment over 90 days.

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

United States Steel  vs.  Walmart

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Walmart

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, Walmart may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with United States and Walmart

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

The idea behind United States Steel and Walmart 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.