Correlation Between Walgreens Boots and Big Yellow

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

Diversification Opportunities for Walgreens Boots and Big Yellow

-0.12

Correlation Coefficient

Walgreens Boots  Big Yellow

Good diversification

The 3 months correlation between Walgreens and Big is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Big Yellow Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Yellow Group 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 Big Yellow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Yellow Group has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Big Yellow go up and down completely randomly.

Pair Corralation between Walgreens Boots and Big Yellow

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the Big Yellow. In addition to that, Walgreens Boots is 2.61 times more volatile than Big Yellow Group. It trades about -0.06 of its total potential returns per unit of risk. Big Yellow Group is currently generating about -0.04 per unit of volatility. If you would invest  3,325  in Big Yellow Group on September 23, 2024 and sell it today you would lose (535.00) from holding Big Yellow Group or give up 16.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.54%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Big Yellow Group

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.

Big Yellow Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Yellow Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Walgreens Boots and Big Yellow

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

The idea behind Walgreens Boots Alliance and Big Yellow Group 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.