Correlation Between Walgreens Boots and Denbury Resources

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

Diversification Opportunities for Walgreens Boots and Denbury Resources

0.11

Correlation Coefficient

Walgreens Boots  Denbury Resources

Average diversification

The 3 months correlation between Walgreens and Denbury is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Denbury Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Denbury Resources 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 Denbury Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Denbury Resources has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Denbury Resources go up and down completely randomly.

Pair Corralation between Walgreens Boots and Denbury Resources

If you would invest  866.00  in Walgreens Boots Alliance on September 17, 2024 and sell it today you would earn a total of  173.00  from holding Walgreens Boots Alliance or generate 19.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	5.0%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Denbury Resources

Walgreens Boots Alliance

Risk-Adjusted Performance

6 of 100

Modest

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.

Denbury Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Denbury Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Denbury Resources is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Walgreens Boots and Denbury Resources

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

The idea behind Walgreens Boots Alliance and Denbury Resources 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.