Correlation Between Walgreens Boots and Pershing Square

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

Diversification Opportunities for Walgreens Boots and Pershing Square

0.2

Correlation Coefficient

Walgreens Boots  Pershing Square

Modest diversification

The 3 months correlation between Walgreens and Pershing is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Pershing Square Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pershing Square Holdings 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 Pershing Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pershing Square Holdings has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Pershing Square go up and down completely randomly.

Pair Corralation between Walgreens Boots and Pershing Square

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to generate 4.46 times more return on investment than Pershing Square. However, Walgreens Boots is 4.46 times more volatile than Pershing Square Holdings. It trades about 0.2 of its potential returns per unit of risk. Pershing Square Holdings is currently generating about 0.29 per unit of risk. If you would invest  855.00  in Walgreens Boots Alliance on September 15, 2024 and sell it today you would earn a total of  184.00  from holding Walgreens Boots Alliance or generate 21.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Pershing Square Holdings

Walgreens Boots Alliance

Risk-Adjusted Performance

6 of 100

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.

Pershing Square Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pershing Square Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Pershing Square is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Walgreens Boots and Pershing Square

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

The idea behind Walgreens Boots Alliance and Pershing Square Holdings 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.