Correlation Between Walgreens Boots and Vulcan Minerals

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

Diversification Opportunities for Walgreens Boots and Vulcan Minerals

-0.1

Correlation Coefficient

Walgreens Boots  Vulcan Minerals

Good diversification

The 3 months correlation between Walgreens and Vulcan is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Vulcan Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Minerals 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 Vulcan Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Minerals has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Vulcan Minerals go up and down completely randomly.

Pair Corralation between Walgreens Boots and Vulcan Minerals

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the Vulcan Minerals. But the stock apears to be less risky and, when comparing its historical volatility, Walgreens Boots Alliance is 6.35 times less risky than Vulcan Minerals. The stock trades about -0.05 of its potential returns per unit of risk. The Vulcan Minerals is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Vulcan Minerals on December 3, 2024 and sell it today you would lose (9.00) from holding Vulcan Minerals or give up 47.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Vulcan Minerals

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.

Vulcan Minerals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Minerals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Vulcan Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walgreens Boots and Vulcan Minerals

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

The idea behind Walgreens Boots Alliance and Vulcan Minerals 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.