Correlation Between Cal Maine and Walgreens Boots

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

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

Diversification Opportunities for Cal Maine and Walgreens Boots

0.38

Correlation Coefficient

Cal Maine  Walgreens Boots

Weak diversification

The 3 months correlation between Cal and Walgreens is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods 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 Cal Maine 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 Cal Maine Foods 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 Cal Maine i.e., Cal Maine and Walgreens Boots go up and down completely randomly.

Pair Corralation between Cal Maine and Walgreens Boots

Assuming the 90 days trading horizon Cal Maine Foods is expected to under-perform the Walgreens Boots. But the stock apears to be less risky and, when comparing its historical volatility, Cal Maine Foods is 1.45 times less risky than Walgreens Boots. The stock trades about -0.29 of its potential returns per unit of risk. The Walgreens Boots Alliance is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,014  in Walgreens Boots Alliance on December 2, 2024 and sell it today you would earn a total of  10.00  from holding Walgreens Boots Alliance or generate 0.99% return on investment over 90 days.

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

Cal Maine Foods  vs.  Walgreens Boots Alliance

Cal Maine Foods

Risk-Adjusted Performance

Very Weak

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

Walgreens Boots Alliance

Risk-Adjusted Performance

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 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 Cal Maine and Walgreens Boots

The main advantage of trading using opposite Cal Maine and Walgreens Boots positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cal Maine 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 Cal Maine Foods 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.