Correlation Between Walgreens Boots and Capital Securities

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

Diversification Opportunities for Walgreens Boots and Capital Securities

0.54

Correlation Coefficient

Walgreens Boots  Capital Securities

Very weak diversification

The 3 months correlation between Walgreens and Capital is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Capital Securities Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Securities Corp 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 Capital Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Securities Corp has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Capital Securities go up and down completely randomly.

Pair Corralation between Walgreens Boots and Capital Securities

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to generate 4.23 times more return on investment than Capital Securities. However, Walgreens Boots is 4.23 times more volatile than Capital Securities Corp. It trades about 0.16 of its potential returns per unit of risk. Capital Securities Corp is currently generating about 0.37 per unit of risk. If you would invest  866.00  in Walgreens Boots Alliance on September 18, 2024 and sell it today you would earn a total of  131.00  from holding Walgreens Boots Alliance or generate 15.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Capital Securities Corp

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.

Capital Securities Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Securities Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Capital Securities showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walgreens Boots and Capital Securities

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

The idea behind Walgreens Boots Alliance and Capital Securities Corp 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.