Correlation Between Walgreens Boots and TRADEGATE

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

Diversification Opportunities for Walgreens Boots and TRADEGATE

-0.14

Correlation Coefficient

Walgreens Boots  TRADEGATE

Good diversification

The 3 months correlation between Walgreens and TRADEGATE is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and TRADEGATE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRADEGATE 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 TRADEGATE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRADEGATE has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and TRADEGATE go up and down completely randomly.

Pair Corralation between Walgreens Boots and TRADEGATE

Assuming the 90 days horizon Walgreens Boots Alliance is expected to generate 19.15 times more return on investment than TRADEGATE. However, Walgreens Boots is 19.15 times more volatile than TRADEGATE. It trades about 0.08 of its potential returns per unit of risk. TRADEGATE is currently generating about -0.09 per unit of risk. If you would invest  864.00  in Walgreens Boots Alliance on December 2, 2024 and sell it today you would earn a total of  160.00  from holding Walgreens Boots Alliance or generate 18.52% return on investment over 90 days.

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

Walgreens Boots Alliance  vs.  TRADEGATE

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.

TRADEGATE

Risk-Adjusted Performance

Very Weak

Over the last 90 days TRADEGATE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, TRADEGATE is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Walgreens Boots and TRADEGATE

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

The idea behind Walgreens Boots Alliance and TRADEGATE 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.