Correlation Between Walgreens Boots and Optima Prima

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

Diversification Opportunities for Walgreens Boots and Optima Prima

0.03

Correlation Coefficient

Walgreens Boots  Optima Prima

Significant diversification

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

Pair Corralation between Walgreens Boots and Optima Prima

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to generate 5.74 times more return on investment than Optima Prima. However, Walgreens Boots is 5.74 times more volatile than Optima Prima Metal. It trades about 0.08 of its potential returns per unit of risk. Optima Prima Metal is currently generating about 0.0 per unit of risk. If you would invest  919.00  in Walgreens Boots Alliance on December 24, 2024 and sell it today you would earn a total of  196.00  from holding Walgreens Boots Alliance or generate 21.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.08%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Optima Prima Metal

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.

Optima Prima Metal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Optima Prima Metal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Optima Prima is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Walgreens Boots and Optima Prima

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

The idea behind Walgreens Boots Alliance and Optima Prima Metal 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..