Correlation Between Walgreens Boots and Mid Cap

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

Diversification Opportunities for Walgreens Boots and Mid Cap

0.05

Correlation Coefficient

Walgreens Boots  Mid Cap

Significant diversification

The 3 months correlation between Walgreens and Mid is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Mid Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Growth 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 Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Growth has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Mid Cap go up and down completely randomly.

Pair Corralation between Walgreens Boots and Mid Cap

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to generate 3.45 times more return on investment than Mid Cap. However, Walgreens Boots is 3.45 times more volatile than Mid Cap Growth. It trades about 0.06 of its potential returns per unit of risk. Mid Cap Growth is currently generating about 0.1 per unit of risk. If you would invest  827.00  in Walgreens Boots Alliance on September 26, 2024 and sell it today you would earn a total of  92.00  from holding Walgreens Boots Alliance or generate 11.12% return on investment over 90 days.

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

Walgreens Boots Alliance  vs.  Mid Cap Growth

Walgreens Boots Alliance

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Walgreens Boots sustained solid returns over the last few months and may actually be approaching a breakup point.

Mid Cap Growth

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Growth are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Mid Cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Walgreens Boots and Mid Cap

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

The idea behind Walgreens Boots Alliance and Mid Cap Growth 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.