Correlation Between Walmart and Rite Aid

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Can any of the company-specific risk be diversified away by investing in both Walmart and Rite Aid 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 Rite Aid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Rite Aid, you can compare the effects of market volatilities on Walmart and Rite Aid 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 Rite Aid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Rite Aid.

Diversification Opportunities for Walmart and Rite Aid

-0.76
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Walmart and Rite is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Rite Aid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rite Aid 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 Rite Aid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rite Aid has no effect on the direction of Walmart i.e., Walmart and Rite Aid go up and down completely randomly.

Pair Corralation between Walmart and Rite Aid

If you would invest  5,939  in Walmart on December 29, 2023 and sell it today you would earn a total of  78.00  from holding Walmart or generate 1.31% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy4.35%
ValuesDaily Returns

Walmart  vs.  Rite Aid

 Performance 
       Timeline  
Walmart 

Risk-Adjusted Performance

20 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.
Rite Aid 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Rite Aid has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Rite Aid is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Walmart and Rite Aid Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Walmart and Rite Aid

The main advantage of trading using opposite Walmart and Rite Aid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Rite Aid 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 Rite Aid will offset losses from the drop in Rite Aid's long position.
The idea behind Walmart and Rite Aid 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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