Correlation Between Walgreens Boots and SPDR SP

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

Diversification Opportunities for Walgreens Boots and SPDR SP

0.07

Correlation Coefficient

Walgreens Boots  SPDR SP

Significant diversification

The 3 months correlation between Walgreens and SPDR is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and SPDR SP Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Utilities 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Utilities has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and SPDR SP go up and down completely randomly.

Pair Corralation between Walgreens Boots and SPDR SP

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the SPDR SP. In addition to that, Walgreens Boots is 3.54 times more volatile than SPDR SP Utilities. It trades about -0.05 of its total potential returns per unit of risk. SPDR SP Utilities is currently generating about 0.1 per unit of volatility. If you would invest  3,672  in SPDR SP Utilities on September 14, 2024 and sell it today you would earn a total of  1,043  from holding SPDR SP Utilities or generate 28.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.63%
Values	Daily Returns

Walgreens Boots Alliance  vs.  SPDR SP Utilities

Walgreens Boots Alliance

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 6 (%) 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.

SPDR SP Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, SPDR SP is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Walgreens Boots and SPDR SP

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

The idea behind Walgreens Boots Alliance and SPDR SP Utilities 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.