Correlation Between Walgreens Boots and HONEYWELL

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

Diversification Opportunities for Walgreens Boots and HONEYWELL

-0.02

Correlation Coefficient

Walgreens Boots  HONEYWELL

Good diversification

The 3 months correlation between Walgreens and HONEYWELL is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and HONEYWELL INTERNATIONAL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HONEYWELL INTERNATIONAL 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 HONEYWELL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HONEYWELL INTERNATIONAL has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and HONEYWELL go up and down completely randomly.

Pair Corralation between Walgreens Boots and HONEYWELL

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the HONEYWELL. But the stock apears to be less risky and, when comparing its historical volatility, Walgreens Boots Alliance is 28.35 times less risky than HONEYWELL. The stock trades about -0.07 of its potential returns per unit of risk. The HONEYWELL INTERNATIONAL INC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7,353  in HONEYWELL INTERNATIONAL INC on September 23, 2024 and sell it today you would earn a total of  109.00  from holding HONEYWELL INTERNATIONAL INC or generate 1.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	64.79%
Values	Daily Returns

Walgreens Boots Alliance  vs.  HONEYWELL INTERNATIONAL INC

Walgreens Boots Alliance

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 5 (%) 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.

HONEYWELL INTERNATIONAL

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HONEYWELL INTERNATIONAL INC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, HONEYWELL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Walgreens Boots and HONEYWELL

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

The idea behind Walgreens Boots Alliance and HONEYWELL INTERNATIONAL INC 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.