Correlation Between Lowes Companies and Walmart
Can any of the company-specific risk be diversified away by investing in both Lowes Companies 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 Lowes Companies and Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lowes Companies and Walmart, you can compare the effects of market volatilities on Lowes Companies 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 Lowes Companies with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lowes Companies and Walmart.
Diversification Opportunities for Lowes Companies and Walmart
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lowes and Walmart is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Lowes Companies and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Lowes Companies 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 Lowes Companies 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 Lowes Companies i.e., Lowes Companies and Walmart go up and down completely randomly.
Pair Corralation between Lowes Companies and Walmart
Considering the 90-day investment horizon Lowes Companies is expected to generate 2.59 times less return on investment than Walmart. In addition to that, Lowes Companies is 1.66 times more volatile than Walmart. It trades about 0.12 of its total potential returns per unit of risk. Walmart is currently generating about 0.53 per unit of volatility. If you would invest 8,139 in Walmart on August 31, 2024 and sell it today you would earn a total of 1,049 from holding Walmart or generate 12.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lowes Companies vs. Walmart
Performance |
| Timeline |
| Lowes Companies |
| Walmart |
Lowes Companies and Walmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lowes Companies and Walmart
The main advantage of trading using opposite Lowes Companies and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lowes Companies 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.| Lowes Companies vs. RLJ Lodging Trust | Lowes Companies vs. Aquagold International | Lowes Companies vs. Stepstone Group | Lowes Companies vs. Morningstar Unconstrained Allocation |
| Walmart vs. Dollar General | Walmart vs. Aquagold International | Walmart vs. Thrivent High Yield | Walmart vs. Morningstar Unconstrained Allocation |
Check out your portfolio center.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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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