Correlation Between Walgreens Boots and Community Bank

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

Diversification Opportunities for Walgreens Boots and Community Bank

0.19

Correlation Coefficient

Walgreens Boots  Community Bank

Average diversification

The 3 months correlation between Walgreens and Community is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Community Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Bank 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 Community Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Bank has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Community Bank go up and down completely randomly.

Pair Corralation between Walgreens Boots and Community Bank

If you would invest  1,039  in Walgreens Boots Alliance on October 14, 2024 and sell it today you would earn a total of  137.00  from holding Walgreens Boots Alliance or generate 13.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	5.26%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Community Bank

Walgreens Boots Alliance

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, Walgreens Boots sustained solid returns over the last few months and may actually be approaching a breakup point.

Community Bank

Risk-Adjusted Performance

0 of 100

Strong

Over the last 90 days Community Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak fundamental drivers, Community Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Walgreens Boots and Community Bank

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

The idea behind Walgreens Boots Alliance and Community Bank 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..