Correlation Between Apple and Walmart

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

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

Diversification Opportunities for Apple and Walmart

0.93

Correlation Coefficient

Apple  Walmart

Almost no diversification

The 3 months correlation between Apple and Walmart is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Apple 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 Apple Inc 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 Apple i.e., Apple and Walmart go up and down completely randomly.

Pair Corralation between Apple and Walmart

Assuming the 90 days trading horizon Apple is expected to generate 1.06 times less return on investment than Walmart. But when comparing it to its historical volatility, Apple Inc is 1.37 times less risky than Walmart. It trades about 0.56 of its potential returns per unit of risk. Walmart is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  8,178  in Walmart on September 20, 2024 and sell it today you would earn a total of  1,003  from holding Walmart or generate 12.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Apple Inc  vs.  Walmart

Apple Inc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Apple sustained solid returns over the last few months and may actually be approaching a breakup point.

Walmart

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Walmart reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Walmart

The main advantage of trading using opposite Apple and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.