Correlation Between Walgreens Boots and Income Fund

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

Diversification Opportunities for Walgreens Boots and Income Fund

0.03

Correlation Coefficient

Walgreens Boots  Income Fund

Significant diversification

The 3 months correlation between Walgreens and Income is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Income Fund Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Fund Income 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 Income Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Fund Income has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Income Fund go up and down completely randomly.

Pair Corralation between Walgreens Boots and Income Fund

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the Income Fund. In addition to that, Walgreens Boots is 7.91 times more volatile than Income Fund Income. It trades about -0.07 of its total potential returns per unit of risk. Income Fund Income is currently generating about 0.03 per unit of volatility. If you would invest  1,073  in Income Fund Income on October 10, 2024 and sell it today you would earn a total of  59.00  from holding Income Fund Income or generate 5.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Income Fund Income

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 uncertain fundamental drivers, Walgreens Boots sustained solid returns over the last few months and may actually be approaching a breakup point.

Income Fund Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Income Fund Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Income Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Walgreens Boots and Income Fund

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

The idea behind Walgreens Boots Alliance and Income Fund Income 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.