Correlation Between Walgreens Boots and Parkland

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

Diversification Opportunities for Walgreens Boots and Parkland

-0.08

Correlation Coefficient

Walgreens Boots  Parkland

Good diversification

The 3 months correlation between Walgreens and Parkland is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Parkland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parkland 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 Parkland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parkland has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Parkland go up and down completely randomly.

Pair Corralation between Walgreens Boots and Parkland

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the Parkland. In addition to that, Walgreens Boots is 1.04 times more volatile than Parkland. It trades about -0.08 of its total potential returns per unit of risk. Parkland is currently generating about 0.02 per unit of volatility. If you would invest  2,086  in Parkland on September 27, 2024 and sell it today you would earn a total of  204.00  from holding Parkland or generate 9.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.15%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Parkland

Walgreens Boots Alliance

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Walgreens Boots sustained solid returns over the last few months and may actually be approaching a breakup point.

Parkland

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Parkland has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Walgreens Boots and Parkland

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

The idea behind Walgreens Boots Alliance and Parkland 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.