Correlation Between Walgreens Boots and MicroSectors Travel

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

Diversification Opportunities for Walgreens Boots and MicroSectors Travel

0.19

Correlation Coefficient

Walgreens Boots  MicroSectors Travel

Average diversification

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

Pair Corralation between Walgreens Boots and MicroSectors Travel

Considering the 90-day investment horizon Walgreens Boots is expected to generate 3.88 times less return on investment than MicroSectors Travel. In addition to that, Walgreens Boots is 1.22 times more volatile than MicroSectors Travel 3X. It trades about 0.06 of its total potential returns per unit of risk. MicroSectors Travel 3X is currently generating about 0.28 per unit of volatility. If you would invest  3,594  in MicroSectors Travel 3X on September 14, 2024 and sell it today you would earn a total of  2,760  from holding MicroSectors Travel 3X or generate 76.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Walgreens Boots Alliance  vs.  MicroSectors Travel 3X

Walgreens Boots Alliance

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 4 (%) 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.

MicroSectors Travel

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors Travel 3X are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, MicroSectors Travel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walgreens Boots and MicroSectors Travel

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

The idea behind Walgreens Boots Alliance and MicroSectors Travel 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.