Correlation Between Walmart and Chevron Corp

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

Diversification Opportunities for Walmart and Chevron Corp

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Walmart and Chevron is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp 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 Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of Walmart i.e., Walmart and Chevron Corp go up and down completely randomly.

Pair Corralation between Walmart and Chevron Corp

Considering the 90-day investment horizon Walmart is expected to under-perform the Chevron Corp. But the stock apears to be less risky and, when comparing its historical volatility, Walmart is 1.3 times less risky than Chevron Corp. The stock trades about 0.0 of its potential returns per unit of risk. The Chevron Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,540  in Chevron Corp on July 4, 2022 and sell it today you would earn a total of  4,827  from holding Chevron Corp or generate 50.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Walmart  vs.  Chevron Corp

 Performance (%) 
       Timeline  
Walmart 
Walmart Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, Walmart is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Walmart Price Channel

Chevron Corp 
Chevron Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Chevron Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Chevron Price Channel

Walmart and Chevron Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Walmart and Chevron Corp

The main advantage of trading using opposite Walmart and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Chevron Corp 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 Chevron Corp will offset losses from the drop in Chevron Corp's long position.
Walmart vs. Amazon Inc
The idea behind Walmart and Chevron Corp 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.
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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