Correlation Between Walgreens Boots and Satcom Systems

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

Diversification Opportunities for Walgreens Boots and Satcom Systems

0.08

Correlation Coefficient

Walgreens Boots  Satcom Systems

Significant diversification

The 3 months correlation between Walgreens and Satcom is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Satcom Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Satcom Systems 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 Satcom Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Satcom Systems has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Satcom Systems go up and down completely randomly.

Pair Corralation between Walgreens Boots and Satcom Systems

Considering the 90-day investment horizon Walgreens Boots is expected to generate 4.79 times less return on investment than Satcom Systems. In addition to that, Walgreens Boots is 1.29 times more volatile than Satcom Systems. It trades about 0.04 of its total potential returns per unit of risk. Satcom Systems is currently generating about 0.22 per unit of volatility. If you would invest  5,580  in Satcom Systems on September 27, 2024 and sell it today you would earn a total of  1,950  from holding Satcom Systems or generate 34.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	70.31%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Satcom Systems

Walgreens Boots Alliance

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 2 (%) 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.

Satcom Systems

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Satcom Systems are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Satcom Systems sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walgreens Boots and Satcom Systems

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

The idea behind Walgreens Boots Alliance and Satcom Systems 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..