Correlation Between Walgreens Boots and KB No2

Can any of the company-specific risk be diversified away by investing in both Walgreens Boots and KB No2 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 KB No2 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 KB No2 Special, you can compare the effects of market volatilities on Walgreens Boots and KB No2 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 KB No2. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walgreens Boots and KB No2.

Diversification Opportunities for Walgreens Boots and KB No2

-0.03

Correlation Coefficient

Walgreens Boots  KB No2

Good diversification

The 3 months correlation between Walgreens and 192250 is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and KB No2 Special in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB No2 Special 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 KB No2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KB No2 Special has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and KB No2 go up and down completely randomly.

Pair Corralation between Walgreens Boots and KB No2

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the KB No2. In addition to that, Walgreens Boots is 1.09 times more volatile than KB No2 Special. It trades about -0.07 of its total potential returns per unit of risk. KB No2 Special is currently generating about -0.05 per unit of volatility. If you would invest  1,555,598  in KB No2 Special on September 19, 2024 and sell it today you would lose (743,598) from holding KB No2 Special or give up 47.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.62%
Values	Daily Returns

Walgreens Boots Alliance  vs.  KB No2 Special

Walgreens Boots Alliance

Risk-Adjusted Performance

5 of 100

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

KB No2 Special

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KB No2 Special has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Walgreens Boots and KB No2

The main advantage of trading using opposite Walgreens Boots and KB No2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walgreens Boots position performs unexpectedly, KB No2 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 KB No2 will offset losses from the drop in KB No2's long position.

The idea behind Walgreens Boots Alliance and KB No2 Special 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.