Correlation Between Walgreens Boots and Wolfden Resources

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

Diversification Opportunities for Walgreens Boots and Wolfden Resources

0.28

Correlation Coefficient

Walgreens Boots  Wolfden Resources

Modest diversification

The 3 months correlation between Walgreens and Wolfden is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Wolfden Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wolfden Resources 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 Wolfden Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wolfden Resources has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Wolfden Resources go up and down completely randomly.

Pair Corralation between Walgreens Boots and Wolfden Resources

Considering the 90-day investment horizon Walgreens Boots is expected to generate 70.12 times less return on investment than Wolfden Resources. But when comparing it to its historical volatility, Walgreens Boots Alliance is 32.14 times less risky than Wolfden Resources. It trades about 0.07 of its potential returns per unit of risk. Wolfden Resources is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2.07  in Wolfden Resources on September 22, 2024 and sell it today you would earn a total of  1.93  from holding Wolfden Resources or generate 93.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.97%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Wolfden Resources

Walgreens Boots Alliance

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 5 (%) 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.

Wolfden Resources

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wolfden Resources are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Wolfden Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walgreens Boots and Wolfden Resources

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

The idea behind Walgreens Boots Alliance and Wolfden Resources 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.