Correlation Between Walgreens Boots and CVS Health
Can any of the company-specific risk be diversified away by investing in both Walgreens Boots and CVS Health 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 CVS Health 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 CVS Health, you can compare the effects of market volatilities on Walgreens Boots and CVS Health 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 CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walgreens Boots and CVS Health.
Diversification Opportunities for Walgreens Boots and CVS Health
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Walgreens and CVS is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health 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 CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and CVS Health go up and down completely randomly.
Pair Corralation between Walgreens Boots and CVS Health
Assuming the 90 days horizon Walgreens Boots Alliance is expected to generate 2.1 times more return on investment than CVS Health. However, Walgreens Boots is 2.1 times more volatile than CVS Health. It trades about 0.14 of its potential returns per unit of risk. CVS Health is currently generating about 0.02 per unit of risk. If you would invest 866.00 in Walgreens Boots Alliance on September 12, 2024 and sell it today you would earn a total of 103.00 from holding Walgreens Boots Alliance or generate 11.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walgreens Boots Alliance vs. CVS Health
Performance |
| Timeline |
| Walgreens Boots Alliance |
| CVS Health |
Walgreens Boots and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walgreens Boots and CVS Health
The main advantage of trading using opposite Walgreens Boots and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walgreens Boots position performs unexpectedly, CVS Health 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 CVS Health will offset losses from the drop in CVS Health's long position.| Walgreens Boots vs. Cal Maine Foods | Walgreens Boots vs. Zijin Mining Group | Walgreens Boots vs. LIFEWAY FOODS | Walgreens Boots vs. TYSON FOODS A |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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