Correlation Between Walgreens Boots and CECO ENVIRONMENTAL

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

Diversification Opportunities for Walgreens Boots and CECO ENVIRONMENTAL

0.06

Correlation Coefficient

Walgreens Boots  CECO ENVIRONMENTAL

Significant diversification

The 3 months correlation between Walgreens and CECO is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and CECO ENVIRONMENTAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CECO ENVIRONMENTAL 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 CECO ENVIRONMENTAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CECO ENVIRONMENTAL has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and CECO ENVIRONMENTAL go up and down completely randomly.

Pair Corralation between Walgreens Boots and CECO ENVIRONMENTAL

Assuming the 90 days horizon Walgreens Boots Alliance is expected to generate 1.51 times more return on investment than CECO ENVIRONMENTAL. However, Walgreens Boots is 1.51 times more volatile than CECO ENVIRONMENTAL. It trades about 0.06 of its potential returns per unit of risk. CECO ENVIRONMENTAL is currently generating about -0.08 per unit of risk. If you would invest  921.00  in Walgreens Boots Alliance on December 30, 2024 and sell it today you would earn a total of  109.00  from holding Walgreens Boots Alliance or generate 11.83% return on investment over 90 days.

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

Walgreens Boots Alliance  vs.  CECO ENVIRONMENTAL

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 4 (%) 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.

CECO ENVIRONMENTAL

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Walgreens Boots and CECO ENVIRONMENTAL

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

The idea behind Walgreens Boots Alliance and CECO ENVIRONMENTAL 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.