Correlation Between Costco Wholesale and Walmart

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

Diversification Opportunities for Costco Wholesale and Walmart

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Costco and Walmart is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale Corp and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Costco Wholesale 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 Costco Wholesale Corp 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 Costco Wholesale i.e., Costco Wholesale and Walmart go up and down completely randomly.

Pair Corralation between Costco Wholesale and Walmart

Given the investment horizon of 90 days Costco Wholesale is expected to generate 3.35 times less return on investment than Walmart. In addition to that, Costco Wholesale is 1.11 times more volatile than Walmart. It trades about 0.03 of its total potential returns per unit of risk. Walmart is currently generating about 0.12 per unit of volatility. If you would invest  12,284  in Walmart on September 5, 2022 and sell it today you would earn a total of  3,038  from holding Walmart or generate 24.73% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Costco Wholesale Corp  vs.  Walmart

 Performance (%) 
       Timeline  
Costco Wholesale Corp 
Costco Performance
0 of 100
Over the last 90 days Costco Wholesale Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Costco Wholesale is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Costco 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 unsteady primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Walmart Price Channel

Costco Wholesale and Walmart Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Costco Wholesale and Walmart

The main advantage of trading using opposite Costco Wholesale and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale 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.
Costco Wholesale vs. The Andersons
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Costco Wholesale vs. The Chefs Warehouse
The idea behind Costco Wholesale Corp 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.
Walmart vs. The Andersons
Walmart vs. Caseys General Stores
Walmart vs. Companhia Brasileira De
Walmart vs. The Chefs Warehouse
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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