Correlation Between Walgreens Boots and First Capital

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

Diversification Opportunities for Walgreens Boots and First Capital

-0.34

Correlation Coefficient

Walgreens Boots  First Capital

Very good diversification

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

Pair Corralation between Walgreens Boots and First Capital

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to generate 57.19 times more return on investment than First Capital. However, Walgreens Boots is 57.19 times more volatile than First Capital Bancshares. It trades about 0.2 of its potential returns per unit of risk. First Capital Bancshares is currently generating about 0.22 per unit of risk. If you would invest  866.00  in Walgreens Boots Alliance on September 17, 2024 and sell it today you would earn a total of  173.00  from holding Walgreens Boots Alliance or generate 19.98% 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.  First Capital Bancshares

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.

First Capital Bancshares

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Capital Bancshares are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, First Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Walgreens Boots and First Capital

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

The idea behind Walgreens Boots Alliance and First Capital Bancshares 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.