Correlation Between Walgreens Boots and SMS Co,

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

Diversification Opportunities for Walgreens Boots and SMS Co,

-0.11

Correlation Coefficient

Walgreens Boots  SMS Co,

Good diversification

The 3 months correlation between Walgreens and SMS is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and SMS Co, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMS Co, 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 SMS Co,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMS Co, has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and SMS Co, go up and down completely randomly.

Pair Corralation between Walgreens Boots and SMS Co,

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the SMS Co,. But the stock apears to be less risky and, when comparing its historical volatility, Walgreens Boots Alliance is 1.16 times less risky than SMS Co,. The stock trades about -0.07 of its potential returns per unit of risk. The SMS Co, is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,171  in SMS Co, on September 26, 2024 and sell it today you would lose (638.00) from holding SMS Co, or give up 54.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	84.27%
Values	Daily Returns

Walgreens Boots Alliance  vs.  SMS Co,

Walgreens Boots Alliance

Risk-Adjusted Performance

4 of 100

Insignificant

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.

SMS Co,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMS Co, has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Walgreens Boots and SMS Co,

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

The idea behind Walgreens Boots Alliance and SMS Co, 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.