Correlation Between Walgreens Boots and First Merchants
Can any of the company-specific risk be diversified away by investing in both Walgreens Boots and First Merchants 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 Merchants 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 Merchants, you can compare the effects of market volatilities on Walgreens Boots and First Merchants 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 Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walgreens Boots and First Merchants.
Diversification Opportunities for Walgreens Boots and First Merchants
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Walgreens and First is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and First Merchants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Merchants 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 Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Merchants has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and First Merchants go up and down completely randomly.
Pair Corralation between Walgreens Boots and First Merchants
Considering the 90-day investment horizon Walgreens Boots Alliance is expected to generate 9.98 times more return on investment than First Merchants. However, Walgreens Boots is 9.98 times more volatile than First Merchants. It trades about 0.24 of its potential returns per unit of risk. First Merchants is currently generating about -0.11 per unit of risk. If you would invest 823.00 in Walgreens Boots Alliance on September 16, 2024 and sell it today you would earn a total of 216.00 from holding Walgreens Boots Alliance or generate 26.25% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Walgreens Boots Alliance vs. First Merchants
Performance |
Timeline |
Walgreens Boots Alliance |
First Merchants |
Walgreens Boots and First Merchants Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Walgreens Boots and First Merchants
The main advantage of trading using opposite Walgreens Boots and First Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walgreens Boots position performs unexpectedly, First Merchants 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 Merchants will offset losses from the drop in First Merchants' long position.Walgreens Boots vs. SunLink Health Systems | Walgreens Boots vs. Kiaro Holdings Corp | Walgreens Boots vs. Leafly Holdings | Walgreens Boots vs. China Jo Jo Drugstores |
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Check out your portfolio center.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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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