Correlation Between Walgreens Boots and General Electric

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

Diversification Opportunities for Walgreens Boots and General Electric

0.96
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Walgreens and General is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and General Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Electric 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 General Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Electric has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and General Electric go up and down completely randomly.

Pair Corralation between Walgreens Boots and General Electric

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to generate 1.59 times more return on investment than General Electric. However, Walgreens Boots is 1.59 times more volatile than General Electric. It trades about 0.26 of its potential returns per unit of risk. General Electric is currently generating about 0.29 per unit of risk. If you would invest  3,604  in Walgreens Boots Alliance on August 31, 2022 and sell it today you would earn a total of  504.00  from holding Walgreens Boots Alliance or generate 13.98% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Walgreens Boots Alliance  vs.  General Electric

 Performance (%) 
       Timeline  
Walgreens Boots Alliance 
Walgreens Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat sluggish fundamental drivers, Walgreens Boots sustained solid returns over the last few months and may actually be approaching a breakup point.

Walgreens Price Channel

General Electric 
General Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in General Electric are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sluggish technical and fundamental indicators, General Electric exhibited solid returns over the last few months and may actually be approaching a breakup point.

General Price Channel

Walgreens Boots and General Electric Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Walgreens Boots and General Electric

The main advantage of trading using opposite Walgreens Boots and General Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walgreens Boots position performs unexpectedly, General Electric 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 General Electric will offset losses from the drop in General Electric's long position.
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The idea behind Walgreens Boots Alliance and General Electric 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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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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