Correlation Between Walgreens Boots and Spectrum Brands

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

Diversification Opportunities for Walgreens Boots and Spectrum Brands

-0.11

Correlation Coefficient

Walgreens Boots  Spectrum Brands

Good diversification

The 3 months correlation between Walgreens and Spectrum is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Spectrum Brands Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectrum Brands Holdings 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 Spectrum Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectrum Brands Holdings has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Spectrum Brands go up and down completely randomly.

Pair Corralation between Walgreens Boots and Spectrum Brands

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the Spectrum Brands. But the stock apears to be less risky and, when comparing its historical volatility, Walgreens Boots Alliance is 1.18 times less risky than Spectrum Brands. The stock trades about -0.06 of its potential returns per unit of risk. The Spectrum Brands Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6,704  in Spectrum Brands Holdings on January 21, 2024 and sell it today you would earn a total of  1,333  from holding Spectrum Brands Holdings or generate 19.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Spectrum Brands Holdings

Walgreens Boots Alliance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Walgreens Boots Alliance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Spectrum Brands Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Spectrum Brands Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Spectrum Brands is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Walgreens Boots and Spectrum Brands

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

The idea behind Walgreens Boots Alliance and Spectrum Brands Holdings 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.