Correlation Between Walgreens Boots and BROADWIND ENRGY

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

Diversification Opportunities for Walgreens Boots and BROADWIND ENRGY

-0.1

Correlation Coefficient

Walgreens Boots  BROADWIND ENRGY

Good diversification

The 3 months correlation between Walgreens and BROADWIND is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and BROADWIND ENRGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BROADWIND ENRGY 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 BROADWIND ENRGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BROADWIND ENRGY has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and BROADWIND ENRGY go up and down completely randomly.

Pair Corralation between Walgreens Boots and BROADWIND ENRGY

Assuming the 90 days horizon Walgreens Boots Alliance is expected to generate 0.82 times more return on investment than BROADWIND ENRGY. However, Walgreens Boots Alliance is 1.22 times less risky than BROADWIND ENRGY. It trades about 0.08 of its potential returns per unit of risk. BROADWIND ENRGY is currently generating about 0.02 per unit of risk. If you would invest  744.00  in Walgreens Boots Alliance on September 5, 2024 and sell it today you would earn a total of  107.00  from holding Walgreens Boots Alliance or generate 14.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Walgreens Boots Alliance  vs.  BROADWIND ENRGY

Walgreens Boots Alliance

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Walgreens Boots reported solid returns over the last few months and may actually be approaching a breakup point.

BROADWIND ENRGY

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BROADWIND ENRGY are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BROADWIND ENRGY is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Walgreens Boots and BROADWIND ENRGY

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

The idea behind Walgreens Boots Alliance and BROADWIND ENRGY 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.