Correlation Between Walgreens Boots and Emperor Energy

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

Diversification Opportunities for Walgreens Boots and Emperor Energy

0.34

Correlation Coefficient

Walgreens Boots  Emperor Energy

Weak diversification

The 3 months correlation between Walgreens and Emperor is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Emperor Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emperor Energy 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 Emperor Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emperor Energy has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Emperor Energy go up and down completely randomly.

Pair Corralation between Walgreens Boots and Emperor Energy

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the Emperor Energy. But the stock apears to be less risky and, when comparing its historical volatility, Walgreens Boots Alliance is 2.51 times less risky than Emperor Energy. The stock trades about -0.01 of its potential returns per unit of risk. The Emperor Energy is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1.20  in Emperor Energy on September 30, 2024 and sell it today you would earn a total of  1.50  from holding Emperor Energy or generate 125.0% return on investment over 90 days.

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

Walgreens Boots Alliance  vs.  Emperor Energy

Walgreens Boots Alliance

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 4 (%) 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.

Emperor Energy

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emperor Energy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Emperor Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walgreens Boots and Emperor Energy

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

The idea behind Walgreens Boots Alliance and Emperor Energy 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.