Correlation Between Walgreens Boots and Kings Town

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

Diversification Opportunities for Walgreens Boots and Kings Town

-0.39

Correlation Coefficient

Walgreens Boots  Kings Town

Very good diversification

The 3 months correlation between Walgreens and Kings is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Kings Town Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kings Town Construction 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 Kings Town. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kings Town Construction has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Kings Town go up and down completely randomly.

Pair Corralation between Walgreens Boots and Kings Town

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the Kings Town. But the stock apears to be less risky and, when comparing its historical volatility, Walgreens Boots Alliance is 1.24 times less risky than Kings Town. The stock trades about -0.09 of its potential returns per unit of risk. The Kings Town Construction is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,170  in Kings Town Construction on September 19, 2024 and sell it today you would earn a total of  3,640  from holding Kings Town Construction or generate 114.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.58%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Kings Town Construction

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.

Kings Town Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kings Town Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Walgreens Boots and Kings Town

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

The idea behind Walgreens Boots Alliance and Kings Town Construction 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.