Correlation Between Walgreens Boots and American International

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

Diversification Opportunities for Walgreens Boots and American International

0.3

Correlation Coefficient

Walgreens Boots  American International

Weak diversification

The 3 months correlation between Walgreens and American is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and American International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American International 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 American International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American International has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and American International go up and down completely randomly.

Pair Corralation between Walgreens Boots and American International

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the American International. In addition to that, Walgreens Boots is 3.23 times more volatile than American International Group. It trades about -0.03 of its total potential returns per unit of risk. American International Group is currently generating about 0.11 per unit of volatility. If you would invest  131,363  in American International Group on September 25, 2024 and sell it today you would earn a total of  19,987  from holding American International Group or generate 15.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.2%
Values	Daily Returns

Walgreens Boots Alliance  vs.  American International Group

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.

American International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American International Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, American International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Walgreens Boots and American International

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

The idea behind Walgreens Boots Alliance and American International Group 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 Commodity Directory module to find actively traded commodities issued by global exchanges.