Correlation Between Walmart and Walgreens Boots
Can any of the company-specific risk be diversified away by investing in both Walmart and Walgreens Boots 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 Walmart and Walgreens Boots into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and Walgreens Boots Alliance, you can compare the effects of market volatilities on Walmart and Walgreens Boots 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 Walmart with a short position of Walgreens Boots. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Walgreens Boots.
Diversification Opportunities for Walmart and Walgreens Boots
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Walmart and Walgreens is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Walgreens Boots Alliance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walgreens Boots Alliance and Walmart 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 Walmart are associated (or correlated) with Walgreens Boots. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walgreens Boots Alliance has no effect on the direction of Walmart i.e., Walmart and Walgreens Boots go up and down completely randomly.
Pair Corralation between Walmart and Walgreens Boots
Considering the 90-day investment horizon Walmart is expected to generate 0.26 times more return on investment than Walgreens Boots. However, Walmart is 3.82 times less risky than Walgreens Boots. It trades about -0.06 of its potential returns per unit of risk. Walgreens Boots Alliance is currently generating about -0.2 per unit of risk. If you would invest 6,051 in Walmart on January 26, 2024 and sell it today you would lose (64.00) from holding Walmart or give up 1.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart vs. Walgreens Boots Alliance
Performance |
| Timeline |
| Walmart |
| Walgreens Boots Alliance |
Walmart and Walgreens Boots Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Walgreens Boots
The main advantage of trading using opposite Walmart and Walgreens Boots positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Walgreens Boots 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 Walgreens Boots will offset losses from the drop in Walgreens Boots' long position.| Walmart vs. Costco Wholesale Corp | Walmart vs. Dollar Tree | Walmart vs. BJs Wholesale Club | Walmart vs. Big Lots |
| Walgreens Boots vs. PetMed Express | Walgreens Boots vs. Bimi International Medical | Walgreens Boots vs. Leafly Holdings | Walgreens Boots vs. Fire Flower Holdings |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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