Correlation Between APPLIED MATERIALS and Walgreens Boots

Can any of the company-specific risk be diversified away by investing in both APPLIED MATERIALS and Walgreens Boots 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 APPLIED MATERIALS and Walgreens Boots into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between APPLIED MATERIALS and Walgreens Boots Alliance, you can compare the effects of market volatilities on APPLIED MATERIALS and Walgreens Boots 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 APPLIED MATERIALS with a short position of Walgreens Boots. Check out your portfolio center. Please also check ongoing floating volatility patterns of APPLIED MATERIALS and Walgreens Boots.

Diversification Opportunities for APPLIED MATERIALS and Walgreens Boots

0.13

Correlation Coefficient

APPLIED MATERIALS  Walgreens Boots

Average diversification

The 3 months correlation between APPLIED and Walgreens is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and Walgreens Boots Alliance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walgreens Boots Alliance and APPLIED MATERIALS 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 APPLIED MATERIALS are associated (or correlated) with Walgreens Boots. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walgreens Boots Alliance has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and Walgreens Boots go up and down completely randomly.

Pair Corralation between APPLIED MATERIALS and Walgreens Boots

Assuming the 90 days trading horizon APPLIED MATERIALS is expected to under-perform the Walgreens Boots. But the stock apears to be less risky and, when comparing its historical volatility, APPLIED MATERIALS is 1.98 times less risky than Walgreens Boots. The stock trades about -0.09 of its potential returns per unit of risk. The Walgreens Boots Alliance is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  900.00  in Walgreens Boots Alliance on December 31, 2024 and sell it today you would earn a total of  130.00  from holding Walgreens Boots Alliance or generate 14.44% return on investment over 90 days.

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

APPLIED MATERIALS  vs.  Walgreens Boots Alliance

APPLIED MATERIALS

Risk-Adjusted Performance

Very Weak

Over the last 90 days APPLIED MATERIALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Walgreens Boots Alliance

Risk-Adjusted Performance

Insignificant

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 nearly fragile basic indicators, Walgreens Boots reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with APPLIED MATERIALS and Walgreens Boots

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

The idea behind APPLIED MATERIALS and Walgreens Boots Alliance 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.

Check out your portfolio center.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.