Correlation Between Walgreens Boots and Lithium Americas

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

Diversification Opportunities for Walgreens Boots and Lithium Americas

0.16
  Correlation Coefficient

Average diversification

The 3 months correlation between Walgreens and Lithium is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Lithium Americas Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Americas Corp 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 Lithium Americas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Americas Corp has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Lithium Americas go up and down completely randomly.

Pair Corralation between Walgreens Boots and Lithium Americas

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the Lithium Americas. But the stock apears to be less risky and, when comparing its historical volatility, Walgreens Boots Alliance is 1.36 times less risky than Lithium Americas. The stock trades about -0.07 of its potential returns per unit of risk. The Lithium Americas Corp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,029  in Lithium Americas Corp on September 28, 2024 and sell it today you would lose (628.00) from holding Lithium Americas Corp or give up 61.03% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

Walgreens Boots Alliance  vs.  Lithium Americas Corp

 Performance 
       Timeline  
Walgreens Boots Alliance 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Walgreens Boots may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Lithium Americas Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Lithium Americas Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Lithium Americas is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Walgreens Boots and Lithium Americas Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Walgreens Boots and Lithium Americas

The main advantage of trading using opposite Walgreens Boots and Lithium Americas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walgreens Boots position performs unexpectedly, Lithium Americas 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 Lithium Americas will offset losses from the drop in Lithium Americas' long position.
The idea behind Walgreens Boots Alliance and Lithium Americas Corp 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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