Correlation Between Amazon and Walmart

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

Diversification Opportunities for Amazon and Walmart

-0.68
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Amazon and Walmart is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Amazon 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 Amazon 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 Amazon i.e., Amazon and Walmart go up and down completely randomly.

Pair Corralation between Amazon and Walmart

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Walmart. In addition to that, Amazon is 2.22 times more volatile than Walmart. It trades about -0.12 of its total potential returns per unit of risk. Walmart is currently generating about 0.26 per unit of volatility. If you would invest  12,970  in Walmart on August 31, 2022 and sell it today you would earn a total of  2,327  from holding Walmart or generate 17.94% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Amazon Inc  vs.  Walmart

 Performance (%) 
       Timeline  
Amazon Inc 
Amazon Performance
0 of 100
Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amazon Price Channel

Walmart 
Walmart Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Walmart Price Channel

Amazon and Walmart Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Walmart

The main advantage of trading using opposite Amazon and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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.
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The idea behind Amazon 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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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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