Correlation Between Walgreens Boots and Texas Gulf

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

Diversification Opportunities for Walgreens Boots and Texas Gulf

0.36

Correlation Coefficient

Walgreens Boots  Texas Gulf

Weak diversification

The 3 months correlation between Walgreens and Texas is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Texas Gulf Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Gulf Energy 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 Texas Gulf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Gulf Energy has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Texas Gulf go up and down completely randomly.

Pair Corralation between Walgreens Boots and Texas Gulf

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the Texas Gulf. In addition to that, Walgreens Boots is 1.49 times more volatile than Texas Gulf Energy. It trades about -0.08 of its total potential returns per unit of risk. Texas Gulf Energy is currently generating about 0.05 per unit of volatility. If you would invest  172,443  in Texas Gulf Energy on September 26, 2024 and sell it today you would earn a total of  83,184  from holding Texas Gulf Energy or generate 48.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.14%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Texas Gulf Energy

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.

Texas Gulf Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Texas Gulf Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Texas Gulf is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Walgreens Boots and Texas Gulf

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

The idea behind Walgreens Boots Alliance and Texas Gulf Energy 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.