Correlation Between Walgreens Boots and Electronic Control

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

Diversification Opportunities for Walgreens Boots and Electronic Control

-0.43

Correlation Coefficient

Walgreens Boots  Electronic Control

Very good diversification

The 3 months correlation between Walgreens and Electronic is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Electronic Control Security in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Control 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 Electronic Control. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic Control has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Electronic Control go up and down completely randomly.

Pair Corralation between Walgreens Boots and Electronic Control

Considering the 90-day investment horizon Walgreens Boots is expected to generate 6.28 times less return on investment than Electronic Control. But when comparing it to its historical volatility, Walgreens Boots Alliance is 5.31 times less risky than Electronic Control. It trades about 0.07 of its potential returns per unit of risk. Electronic Control Security is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.15  in Electronic Control Security on October 1, 2024 and sell it today you would lose (0.07) from holding Electronic Control Security or give up 46.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Electronic Control Security

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.

Electronic Control

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Control Security are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent fundamental indicators, Electronic Control unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walgreens Boots and Electronic Control

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

The idea behind Walgreens Boots Alliance and Electronic Control Security 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.