Correlation Between Walmart and Sprouts Farmers
Can any of the company-specific risk be diversified away by investing in both Walmart and Sprouts Farmers 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 Sprouts Farmers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Sprouts Farmers Market, you can compare the effects of market volatilities on Walmart and Sprouts Farmers 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 Sprouts Farmers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Sprouts Farmers.
Diversification Opportunities for Walmart and Sprouts Farmers
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Walmart and Sprouts is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Sprouts Farmers Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprouts Farmers Market 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 Sprouts Farmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprouts Farmers Market has no effect on the direction of Walmart i.e., Walmart and Sprouts Farmers go up and down completely randomly.
Pair Corralation between Walmart and Sprouts Farmers
Considering the 90-day investment horizon Walmart is expected to under-perform the Sprouts Farmers. But the stock apears to be less risky and, when comparing its historical volatility, Walmart is 1.52 times less risky than Sprouts Farmers. The stock trades about -0.06 of its potential returns per unit of risk. The Sprouts Farmers Market is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 6,391 in Sprouts Farmers Market on January 26, 2024 and sell it today you would earn a total of 168.00 from holding Sprouts Farmers Market or generate 2.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart vs. Sprouts Farmers Market
Performance |
| Timeline |
| Walmart |
| Sprouts Farmers Market |
Walmart and Sprouts Farmers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Sprouts Farmers
The main advantage of trading using opposite Walmart and Sprouts Farmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Sprouts Farmers 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 Sprouts Farmers will offset losses from the drop in Sprouts Farmers' long position.| Walmart vs. Costco Wholesale Corp | Walmart vs. Dollar Tree | Walmart vs. BJs Wholesale Club | Walmart vs. Big Lots |
| Sprouts Farmers vs. Tesco PLC | Sprouts Farmers vs. Casino Guichard Perrachon | Sprouts Farmers vs. Kesko Oyj ADR |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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