Correlation Between Walgreens Boots and North Star

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

Diversification Opportunities for Walgreens Boots and North Star

WalgreensNorthDiversified AwayWalgreensNorthDiversified Away100%
-0.12
  Correlation Coefficient

Good diversification

The 3 months correlation between Walgreens and North is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and North Star Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Star Bond 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 North Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Star Bond has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and North Star go up and down completely randomly.

Pair Corralation between Walgreens Boots and North Star

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to generate 44.53 times more return on investment than North Star. However, Walgreens Boots is 44.53 times more volatile than North Star Bond. It trades about 0.07 of its potential returns per unit of risk. North Star Bond is currently generating about -0.11 per unit of risk. If you would invest  828.00  in Walgreens Boots Alliance on September 24, 2024 and sell it today you would earn a total of  127.00  from holding Walgreens Boots Alliance or generate 15.34% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Walgreens Boots Alliance  vs.  North Star Bond

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -505101520
JavaScript chart by amCharts 3.21.15WBA NSBDX
       Timeline  
Walgreens Boots Alliance 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec8.599.51010.511
North Star Bond 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days North Star Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, North Star is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec8.98.918.928.938.948.958.968.97

Walgreens Boots and North Star Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-13.19-9.88-6.57-3.26-0.013.296.6810.0813.4816.88 10203040
JavaScript chart by amCharts 3.21.15WBA NSBDX
       Returns  

Pair Trading with Walgreens Boots and North Star

The main advantage of trading using opposite Walgreens Boots and North Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walgreens Boots position performs unexpectedly, North Star 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 North Star will offset losses from the drop in North Star's long position.
The idea behind Walgreens Boots Alliance and North Star Bond 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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