Correlation Between Walgreens Boots and WESTERN DIGITAL

Can any of the company-specific risk be diversified away by investing in both Walgreens Boots and WESTERN DIGITAL 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 WESTERN DIGITAL 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 WESTERN DIGITAL, you can compare the effects of market volatilities on Walgreens Boots and WESTERN DIGITAL 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 WESTERN DIGITAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walgreens Boots and WESTERN DIGITAL.

Diversification Opportunities for Walgreens Boots and WESTERN DIGITAL

0.45

Correlation Coefficient

Walgreens Boots  WESTERN DIGITAL

Very weak diversification

The 3 months correlation between Walgreens and WESTERN is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and WESTERN DIGITAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTERN DIGITAL 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 WESTERN DIGITAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTERN DIGITAL has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and WESTERN DIGITAL go up and down completely randomly.

Pair Corralation between Walgreens Boots and WESTERN DIGITAL

Assuming the 90 days horizon Walgreens Boots Alliance is expected to under-perform the WESTERN DIGITAL. In addition to that, Walgreens Boots is 1.17 times more volatile than WESTERN DIGITAL. It trades about -0.09 of its total potential returns per unit of risk. WESTERN DIGITAL is currently generating about 0.08 per unit of volatility. If you would invest  3,320  in WESTERN DIGITAL on September 5, 2024 and sell it today you would earn a total of  3,623  from holding WESTERN DIGITAL or generate 109.13% return on investment over 90 days.

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

Walgreens Boots Alliance  vs.  WESTERN DIGITAL

Walgreens Boots Alliance

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 5 (%) 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.

WESTERN DIGITAL

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Walgreens Boots and WESTERN DIGITAL

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

The idea behind Walgreens Boots Alliance and WESTERN DIGITAL 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 the Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.