Correlation Between Walgreens Boots and Lockheed Martin

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

Diversification Opportunities for Walgreens Boots and Lockheed Martin

0.03

Correlation Coefficient

Walgreens Boots  Lockheed Martin

Significant diversification

The 3 months correlation between Walgreens and Lockheed is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin 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 Lockheed Martin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lockheed Martin has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Lockheed Martin go up and down completely randomly.

Pair Corralation between Walgreens Boots and Lockheed Martin

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to generate 5.25 times more return on investment than Lockheed Martin. However, Walgreens Boots is 5.25 times more volatile than Lockheed Martin. It trades about 0.08 of its potential returns per unit of risk. Lockheed Martin is currently generating about -0.18 per unit of risk. If you would invest  906.00  in Walgreens Boots Alliance on September 28, 2024 and sell it today you would earn a total of  57.50  from holding Walgreens Boots Alliance or generate 6.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Lockheed Martin

Walgreens Boots Alliance

Risk-Adjusted Performance

3 of 100

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.

Lockheed Martin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lockheed Martin has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Lockheed Martin 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 Lockheed Martin

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

The idea behind Walgreens Boots Alliance and Lockheed Martin 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.