Correlation Between Walgreens Boots and CubicFarm Systems

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

Diversification Opportunities for Walgreens Boots and CubicFarm Systems

-0.04

Correlation Coefficient

Walgreens Boots  CubicFarm Systems

Good diversification

The 3 months correlation between Walgreens and CubicFarm is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and CubicFarm Systems Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CubicFarm Systems 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 CubicFarm Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CubicFarm Systems Corp has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and CubicFarm Systems go up and down completely randomly.

Pair Corralation between Walgreens Boots and CubicFarm Systems

Considering the 90-day investment horizon Walgreens Boots is expected to generate 133.05 times less return on investment than CubicFarm Systems. But when comparing it to its historical volatility, Walgreens Boots Alliance is 46.36 times less risky than CubicFarm Systems. It trades about 0.08 of its potential returns per unit of risk. CubicFarm Systems Corp is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  6.00  in CubicFarm Systems Corp on September 17, 2024 and sell it today you would earn a total of  1.00  from holding CubicFarm Systems Corp or generate 16.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Walgreens Boots Alliance  vs.  CubicFarm Systems Corp

Walgreens Boots Alliance

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 6 (%) 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.

CubicFarm Systems Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CubicFarm Systems Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, CubicFarm Systems reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walgreens Boots and CubicFarm Systems

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

The idea behind Walgreens Boots Alliance and CubicFarm Systems 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.