Correlation Between Walgreens Boots and Patterson Companies

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

Diversification Opportunities for Walgreens Boots and Patterson Companies

0.27

Correlation Coefficient

Walgreens Boots  Patterson Companies

Modest diversification

The 3 months correlation between Walgreens and Patterson is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Patterson Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patterson Companies 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 Patterson Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patterson Companies has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Patterson Companies go up and down completely randomly.

Pair Corralation between Walgreens Boots and Patterson Companies

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the Patterson Companies. In addition to that, Walgreens Boots is 1.08 times more volatile than Patterson Companies. It trades about -0.07 of its total potential returns per unit of risk. Patterson Companies is currently generating about 0.03 per unit of volatility. If you would invest  2,452  in Patterson Companies on October 12, 2024 and sell it today you would earn a total of  488.00  from holding Patterson Companies or generate 19.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.0%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Patterson Companies

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 uncertain fundamental drivers, Walgreens Boots may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Patterson Companies

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson Companies are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Patterson Companies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walgreens Boots and Patterson Companies

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

The idea behind Walgreens Boots Alliance and Patterson Companies 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.