Correlation Between Walgreens Boots and Charles Schwab

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

Diversification Opportunities for Walgreens Boots and Charles Schwab

0.23

Correlation Coefficient

Walgreens Boots  Charles Schwab

Modest diversification

The 3 months correlation between Walgreens and Charles is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and The Charles Schwab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charles Schwab 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 Charles Schwab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charles Schwab has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Charles Schwab go up and down completely randomly.

Pair Corralation between Walgreens Boots and Charles Schwab

Considering the 90-day investment horizon Walgreens Boots is expected to generate 1.71 times less return on investment than Charles Schwab. In addition to that, Walgreens Boots is 2.09 times more volatile than The Charles Schwab. It trades about 0.04 of its total potential returns per unit of risk. The Charles Schwab is currently generating about 0.14 per unit of volatility. If you would invest  125,565  in The Charles Schwab on September 28, 2024 and sell it today you would earn a total of  22,235  from holding The Charles Schwab or generate 17.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Walgreens Boots Alliance  vs.  The Charles Schwab

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.

Charles Schwab

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Charles Schwab are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Charles Schwab showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walgreens Boots and Charles Schwab

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

The idea behind Walgreens Boots Alliance and The Charles Schwab 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.