Correlation Between Walmart and Kroger

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

By analyzing existing cross correlation between Walmart and Kroger Company, you can compare the effects of market volatilities on Walmart and Kroger 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 Kroger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Kroger.

Diversification Opportunities for Walmart and Kroger

0.44

Correlation Coefficient

Walmart  Kroger

Very weak diversification

The 3 months correlation between Walmart and Kroger is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Kroger Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kroger Company 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 Kroger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kroger Company has no effect on the direction of Walmart i.e., Walmart and Kroger go up and down completely randomly.

Pair Corralation between Walmart and Kroger

Considering the 90-day investment horizon Walmart is expected to generate 0.86 times more return on investment than Kroger. However, Walmart is 1.16 times less risky than Kroger. It trades about 0.14 of its potential returns per unit of risk. Kroger Company is currently generating about 0.08 per unit of risk. If you would invest  5,319  in Walmart on June 23, 2024 and sell it today you would earn a total of  2,587  from holding Walmart or generate 48.64% return on investment over 90 days.

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

Walmart  vs.  Kroger Company

Walmart

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Kroger Company

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kroger Company are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Kroger may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Pair Trading with Walmart and Kroger

The main advantage of trading using opposite Walmart and Kroger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Kroger 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 Kroger will offset losses from the drop in Kroger's long position.

The idea behind Walmart and Kroger Company 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.