Correlation Between Walgreens Boots and NICE Information

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

Diversification Opportunities for Walgreens Boots and NICE Information

0.39

Correlation Coefficient

Walgreens Boots  NICE Information

Weak diversification

The 3 months correlation between Walgreens and NICE is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and NICE Information Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NICE Information Service 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 NICE Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NICE Information Service has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and NICE Information go up and down completely randomly.

Pair Corralation between Walgreens Boots and NICE Information

Considering the 90-day investment horizon Walgreens Boots is expected to generate 1.08 times less return on investment than NICE Information. In addition to that, Walgreens Boots is 2.06 times more volatile than NICE Information Service. It trades about 0.08 of its total potential returns per unit of risk. NICE Information Service is currently generating about 0.18 per unit of volatility. If you would invest  1,005,000  in NICE Information Service on September 20, 2024 and sell it today you would earn a total of  242,000  from holding NICE Information Service or generate 24.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Walgreens Boots Alliance  vs.  NICE Information Service

Walgreens Boots Alliance

Risk-Adjusted Performance

6 of 100

Insignificant

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 somewhat uncertain fundamental drivers, Walgreens Boots sustained solid returns over the last few months and may actually be approaching a breakup point.

NICE Information Service

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NICE Information Service are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NICE Information sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walgreens Boots and NICE Information

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

The idea behind Walgreens Boots Alliance and NICE Information Service 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.