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Wal Mart And Home Depot Essay

1150 words - 5 pages

In our efforts to choose two of the top five companies in Consumer, Cyclical (IYC) we have chosen to evaluate Wal-Mart (WMT) which was ranked first and Home Depot (HD) ranked third in Consumer, Cyclical. You have asked our team to follow six steps based on our selection of WMT, HD, and IYC for a complete history of this sector. There appears to be many observations which contain Walmart having a large effect on the entire sector thus creating the entire market to shift. However, Home Depot has very similar movements but not as severe as Wal-Mart

The market data for Wal-Mart and Home Depot is based on the information from January 31, 2003 which includes closing price, number of shares ...view middle of the document...

In an article by Troy Wolverton on January 3, 2003 he stated that "Lower customer transactions and lower-than-expected performance in traditional gift categories like hardware and power tools severely impacted December results," the company said in a statement. "These business trends indicate the likelihood of a challenging environment well into the next fiscal year." (Wolverton) An effect with hardware and power tools has caused a sudden drop in closing prices on January 3, 2003. This has an effect on the entire sector since this department of hardware has a large portion of the make up products.

The daily returns for the sector and Wal-Mart have a similar pattern and tend to stay close together, however Home Depot has two low drops in the daily returns on November 19, 2002 and January 3, 2003. This fluctuation appears to be a common occurrence for Home Depot throughout the entire graph. IYC and WMT have a very similar flow as it appears they are shadowing one another. From the appearance of the graph it the large drops in Home Depot that either IYC or Wal-Mart would have the highest average return. Thus debating through evaluating the chart it seems as though IYC may have a higher average due to the consistency of not having large increases or decreases.

The mean daily return and standard deviation for Wal-Mart seems to closely resemble that of the sector. This is confirmed by our data in charts two through three. In these charts Wal-Mart and the sector seem to mirror each other while Home Depot has similar tendencies is obviously not as closely related as Wal-Mart and the sector

After plotting daily returns against volume on a scatter diagram for Wal-Mart, Home Depot and the Consumer Cyclical sector, we found their to be little to none relationship between volume and daily returns. We further proved that their was no relation between volume and daily returns by finding the correlation coefficient for each stock and the ETF. The correlation coefficient for the sector (0.007126) and Wal-Mart (0.1856548) are very close to zero indicating that there is no correlation between volume and returns. While the correlation for Home Depot (-0.57016768) was not as close to...

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