Correlation Between Walgreens Boots and Leverage Shares

Can any of the company-specific risk be diversified away by investing in both Walgreens Boots and Leverage Shares 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 Leverage Shares 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 Leverage Shares 3x, you can compare the effects of market volatilities on Walgreens Boots and Leverage Shares 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 Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walgreens Boots and Leverage Shares.

Diversification Opportunities for Walgreens Boots and Leverage Shares

0.35

Correlation Coefficient

Walgreens Boots  Leverage Shares

Weak diversification

The 3 months correlation between Walgreens and Leverage is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Leverage Shares 3x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leverage Shares 3x 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 Leverage Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leverage Shares 3x has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Leverage Shares go up and down completely randomly.

Pair Corralation between Walgreens Boots and Leverage Shares

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the Leverage Shares. In addition to that, Walgreens Boots is 1.33 times more volatile than Leverage Shares 3x. It trades about -0.03 of its total potential returns per unit of risk. Leverage Shares 3x is currently generating about 0.09 per unit of volatility. If you would invest  1,238  in Leverage Shares 3x on September 25, 2024 and sell it today you would earn a total of  366.00  from holding Leverage Shares 3x or generate 29.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.66%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Leverage Shares 3x

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

Leverage Shares 3x

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leverage Shares 3x has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Leverage Shares is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Walgreens Boots and Leverage Shares

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

The idea behind Walgreens Boots Alliance and Leverage Shares 3x 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.