Correlation Between Walgreens Boots and Carmat

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

Diversification Opportunities for Walgreens Boots and Carmat

-0.19

Correlation Coefficient

Walgreens Boots  Carmat

Good diversification

The 3 months correlation between Walgreens and Carmat is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Carmat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carmat 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 Carmat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carmat has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Carmat go up and down completely randomly.

Pair Corralation between Walgreens Boots and Carmat

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to generate 0.71 times more return on investment than Carmat. However, Walgreens Boots Alliance is 1.41 times less risky than Carmat. It trades about -0.09 of its potential returns per unit of risk. Carmat is currently generating about -0.13 per unit of risk. If you would invest  2,414  in Walgreens Boots Alliance on September 24, 2024 and sell it today you would lose (1,459) from holding Walgreens Boots Alliance or give up 60.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.42%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Carmat

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

Carmat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carmat has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Walgreens Boots and Carmat

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

The idea behind Walgreens Boots Alliance and Carmat 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.