Correlation Between Walgreens Boots and Plum Acquisition

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

Diversification Opportunities for Walgreens Boots and Plum Acquisition

0.3

Correlation Coefficient

Walgreens Boots  Plum Acquisition

Weak diversification

The 3 months correlation between Walgreens and Plum is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Plum Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plum Acquisition Corp 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 Plum Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plum Acquisition Corp has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Plum Acquisition go up and down completely randomly.

Pair Corralation between Walgreens Boots and Plum Acquisition

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to generate 16.98 times more return on investment than Plum Acquisition. However, Walgreens Boots is 16.98 times more volatile than Plum Acquisition Corp. It trades about 0.16 of its potential returns per unit of risk. Plum Acquisition Corp is currently generating about 0.04 per unit of risk. If you would invest  824.00  in Walgreens Boots Alliance on September 21, 2024 and sell it today you would earn a total of  131.00  from holding Walgreens Boots Alliance or generate 15.9% return on investment over 90 days.

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

Walgreens Boots Alliance  vs.  Plum Acquisition Corp

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

Plum Acquisition Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plum Acquisition Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady primary indicators, Plum Acquisition is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Walgreens Boots and Plum Acquisition

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

The idea behind Walgreens Boots Alliance and Plum Acquisition Corp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.