Correlation Between Walgreens Boots and Komatsu

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

Diversification Opportunities for Walgreens Boots and Komatsu

0.22

Correlation Coefficient

Walgreens Boots  Komatsu

Modest diversification

The 3 months correlation between Walgreens and Komatsu is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Komatsu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Komatsu 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 Komatsu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Komatsu has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Komatsu go up and down completely randomly.

Pair Corralation between Walgreens Boots and Komatsu

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to generate 2.03 times more return on investment than Komatsu. However, Walgreens Boots is 2.03 times more volatile than Komatsu. It trades about 0.06 of its potential returns per unit of risk. Komatsu is currently generating about 0.08 per unit of risk. If you would invest  947.00  in Walgreens Boots Alliance on December 5, 2024 and sell it today you would earn a total of  79.00  from holding Walgreens Boots Alliance or generate 8.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Komatsu

Walgreens Boots Alliance

Risk-Adjusted Performance

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 uncertain fundamental drivers, Walgreens Boots sustained solid returns over the last few months and may actually be approaching a breakup point.

Komatsu

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Komatsu are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Komatsu reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walgreens Boots and Komatsu

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

The idea behind Walgreens Boots Alliance and Komatsu 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..