Correlation Between Walgreens Boots and Global X

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

Diversification Opportunities for Walgreens Boots and Global X

0.35

Correlation Coefficient

Walgreens Boots  Global X

Weak diversification

The 3 months correlation between Walgreens and Global is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Global X Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Nasdaq 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Nasdaq has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Global X go up and down completely randomly.

Pair Corralation between Walgreens Boots and Global X

Considering the 90-day investment horizon Walgreens Boots is expected to generate 1.62 times less return on investment than Global X. In addition to that, Walgreens Boots is 5.85 times more volatile than Global X Nasdaq. It trades about 0.04 of its total potential returns per unit of risk. Global X Nasdaq is currently generating about 0.38 per unit of volatility. If you would invest  1,077  in Global X Nasdaq on September 28, 2024 and sell it today you would earn a total of  206.00  from holding Global X Nasdaq or generate 19.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Global X Nasdaq

Walgreens Boots Alliance

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Walgreens Boots may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Global X Nasdaq

Risk-Adjusted Performance

30 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Nasdaq are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Global X unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walgreens Boots and Global X

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

The idea behind Walgreens Boots Alliance and Global X Nasdaq 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.