Correlation Between Walgreens Boots and TriMas

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

Diversification Opportunities for Walgreens Boots and TriMas

0.39

Correlation Coefficient

Walgreens Boots  TriMas

Weak diversification

The 3 months correlation between Walgreens and TriMas is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and TriMas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TriMas 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 TriMas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TriMas has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and TriMas go up and down completely randomly.

Pair Corralation between Walgreens Boots and TriMas

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to generate 2.16 times more return on investment than TriMas. However, Walgreens Boots is 2.16 times more volatile than TriMas. It trades about 0.04 of its potential returns per unit of risk. TriMas is currently generating about -0.02 per unit of risk. If you would invest  879.00  in Walgreens Boots Alliance on September 27, 2024 and sell it today you would earn a total of  40.00  from holding Walgreens Boots Alliance or generate 4.55% return on investment over 90 days.

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

Walgreens Boots Alliance  vs.  TriMas

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.

TriMas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TriMas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, TriMas is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Walgreens Boots and TriMas

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

The idea behind Walgreens Boots Alliance and TriMas 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.