Correlation Between Walgreens Boots and Eagle Point

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

Diversification Opportunities for Walgreens Boots and Eagle Point

0.1

Correlation Coefficient

Walgreens Boots  Eagle Point

Average diversification

The 3 months correlation between Walgreens and Eagle is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Eagle Point Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Point Credit 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 Eagle Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Point Credit has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Eagle Point go up and down completely randomly.

Pair Corralation between Walgreens Boots and Eagle Point

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to generate 14.25 times more return on investment than Eagle Point. However, Walgreens Boots is 14.25 times more volatile than Eagle Point Credit. It trades about 0.08 of its potential returns per unit of risk. Eagle Point Credit is currently generating about 0.04 per unit of risk. If you would invest  845.00  in Walgreens Boots Alliance on September 20, 2024 and sell it today you would earn a total of  152.00  from holding Walgreens Boots Alliance or generate 17.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Eagle Point Credit

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.

Eagle Point Credit

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Point Credit are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, Eagle Point is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Walgreens Boots and Eagle Point

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

The idea behind Walgreens Boots Alliance and Eagle Point Credit 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.