Correlation Between Walgreens Boots and BRIT AMER

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

By analyzing existing cross correlation between Walgreens Boots Alliance and BRIT AMER TOBACCO, you can compare the effects of market volatilities on Walgreens Boots and BRIT AMER 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 Walgreens Boots with a short position of BRIT AMER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walgreens Boots and BRIT AMER.

Diversification Opportunities for Walgreens Boots and BRIT AMER

-0.18

Correlation Coefficient

Walgreens Boots  BRIT AMER

Good diversification

The 3 months correlation between Walgreens and BRIT is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and BRIT AMER TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRIT AMER TOBACCO and Walgreens Boots 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 Walgreens Boots Alliance are associated (or correlated) with BRIT AMER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRIT AMER TOBACCO has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and BRIT AMER go up and down completely randomly.

Pair Corralation between Walgreens Boots and BRIT AMER

Assuming the 90 days horizon Walgreens Boots Alliance is expected to generate 2.35 times more return on investment than BRIT AMER. However, Walgreens Boots is 2.35 times more volatile than BRIT AMER TOBACCO. It trades about 0.08 of its potential returns per unit of risk. BRIT AMER TOBACCO is currently generating about 0.05 per unit of risk. If you would invest  744.00  in Walgreens Boots Alliance on September 5, 2024 and sell it today you would earn a total of  107.00  from holding Walgreens Boots Alliance or generate 14.38% return on investment over 90 days.

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

Walgreens Boots Alliance  vs.  BRIT AMER TOBACCO

Walgreens Boots Alliance

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Walgreens Boots reported solid returns over the last few months and may actually be approaching a breakup point.

BRIT AMER TOBACCO

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Walgreens Boots and BRIT AMER

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

The idea behind Walgreens Boots Alliance and BRIT AMER TOBACCO 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.