Correlation Between Walgreens Boots and Catalent

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

Diversification Opportunities for Walgreens Boots and Catalent

0.42

Correlation Coefficient

Walgreens Boots  Catalent

Very weak diversification

The 3 months correlation between Walgreens and Catalent is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent 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 Catalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalent has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Catalent go up and down completely randomly.

Pair Corralation between Walgreens Boots and Catalent

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to generate 6.03 times more return on investment than Catalent. However, Walgreens Boots is 6.03 times more volatile than Catalent. It trades about 0.06 of its potential returns per unit of risk. Catalent is currently generating about 0.28 per unit of risk. If you would invest  895.00  in Walgreens Boots Alliance on October 4, 2024 and sell it today you would earn a total of  38.00  from holding Walgreens Boots Alliance or generate 4.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	61.9%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Catalent

Walgreens Boots Alliance

Risk-Adjusted Performance

4 of 100

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 somewhat uncertain fundamental drivers, Walgreens Boots sustained solid returns over the last few months and may actually be approaching a breakup point.

Catalent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Catalent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Catalent is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Walgreens Boots and Catalent

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

The idea behind Walgreens Boots Alliance and Catalent 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.