Correlation Between Walgreens Boots and Microsoft
Can any of the company-specific risk be diversified away by investing in both Walgreens Boots and Microsoft 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 Microsoft 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 Microsoft, you can compare the effects of market volatilities on Walgreens Boots and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walgreens Boots and Microsoft.
Diversification Opportunities for Walgreens Boots and Microsoft
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Walgreens and Microsoft is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Microsoft go up and down completely randomly.
Pair Corralation between Walgreens Boots and Microsoft
Assuming the 90 days horizon Walgreens Boots Alliance is expected to under-perform the Microsoft. In addition to that, Walgreens Boots is 2.23 times more volatile than Microsoft. It trades about -0.03 of its total potential returns per unit of risk. Microsoft is currently generating about 0.1 per unit of volatility. If you would invest 36,634 in Microsoft on September 5, 2024 and sell it today you would earn a total of 4,156 from holding Microsoft or generate 11.34% 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. Microsoft
Performance |
| Timeline |
| Walgreens Boots Alliance |
| Microsoft |
Walgreens Boots and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walgreens Boots and Microsoft
The main advantage of trading using opposite Walgreens Boots and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walgreens Boots position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| Walgreens Boots vs. APPLIED MATERIALS | Walgreens Boots vs. Sumitomo Rubber Industries | Walgreens Boots vs. Compagnie Plastic Omnium | Walgreens Boots vs. CEOTRONICS |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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