Correlation Between Walgreens Boots and Sonaecom SGPS

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

Diversification Opportunities for Walgreens Boots and Sonaecom SGPS

-0.28

Correlation Coefficient

Walgreens Boots  Sonaecom SGPS

Very good diversification

The 3 months correlation between Walgreens and Sonaecom is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Sonaecom SGPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonaecom SGPS 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 Sonaecom SGPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonaecom SGPS has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Sonaecom SGPS go up and down completely randomly.

Pair Corralation between Walgreens Boots and Sonaecom SGPS

Considering the 90-day investment horizon Walgreens Boots is expected to generate 1.77 times less return on investment than Sonaecom SGPS. In addition to that, Walgreens Boots is 1.92 times more volatile than Sonaecom SGPS. It trades about 0.07 of its total potential returns per unit of risk. Sonaecom SGPS is currently generating about 0.25 per unit of volatility. If you would invest  220.00  in Sonaecom SGPS on December 5, 2024 and sell it today you would earn a total of  30.00  from holding Sonaecom SGPS or generate 13.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.3%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Sonaecom SGPS

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.

Sonaecom SGPS

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sonaecom SGPS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Sonaecom SGPS may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Walgreens Boots and Sonaecom SGPS

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

The idea behind Walgreens Boots Alliance and Sonaecom SGPS 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.