Correlation Between Walgreens Boots and Small Cap

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

Diversification Opportunities for Walgreens Boots and Small Cap

0.1

Correlation Coefficient

Walgreens Boots  Small Cap

Average diversification

The 3 months correlation between Walgreens and Small is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Small Cap Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Dividend 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Dividend has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Small Cap go up and down completely randomly.

Pair Corralation between Walgreens Boots and Small Cap

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the Small Cap. In addition to that, Walgreens Boots is 3.25 times more volatile than Small Cap Dividend. It trades about -0.07 of its total potential returns per unit of risk. Small Cap Dividend is currently generating about 0.07 per unit of volatility. If you would invest  971.00  in Small Cap Dividend on September 23, 2024 and sell it today you would earn a total of  95.00  from holding Small Cap Dividend or generate 9.78% 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.  Small Cap Dividend

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.

Small Cap Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Cap Dividend has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking indicators, Small Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Walgreens Boots and Small Cap

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

The idea behind Walgreens Boots Alliance and Small Cap Dividend 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..