Correlation Between Performance Food and Walmart
Can any of the company-specific risk be diversified away by investing in both Performance Food 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 Performance Food and Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Performance Food Group and Walmart, you can compare the effects of market volatilities on Performance Food 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 Performance Food with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Performance Food and Walmart.
Diversification Opportunities for Performance Food and Walmart
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Performance and Walmart is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Performance Food Group and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Performance Food 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 Performance Food Group 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 Performance Food i.e., Performance Food and Walmart go up and down completely randomly.
Pair Corralation between Performance Food and Walmart
Assuming the 90 days trading horizon Performance Food Group is expected to under-perform the Walmart. But the stock apears to be less risky and, when comparing its historical volatility, Performance Food Group is 1.28 times less risky than Walmart. The stock trades about -0.2 of its potential returns per unit of risk. The Walmart is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 9,092 in Walmart on October 12, 2024 and sell it today you would lose (152.00) from holding Walmart or give up 1.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 94.44% |
| Values | Daily Returns |
Performance Food Group vs. Walmart
Performance |
| Timeline |
| Performance Food |
| Walmart |
Performance Food and Walmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Performance Food and Walmart
The main advantage of trading using opposite Performance Food and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Performance Food 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.| Performance Food vs. YOOMA WELLNESS INC | Performance Food vs. FEMALE HEALTH | Performance Food vs. Applied Materials | Performance Food vs. US Physical Therapy |
| Walmart vs. TYSON FOODS A | Walmart vs. Sumitomo Rubber Industries | Walmart vs. Tyson Foods | Walmart vs. Performance Food Group |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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