Correlation Between Walgreens Boots and Kroger

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

Diversification Opportunities for Walgreens Boots and Kroger

-0.63

Correlation Coefficient

Walgreens Boots  Kroger

Excellent diversification

The 3 months correlation between Walgreens and Kroger is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Kroger Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kroger Company 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 Kroger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kroger Company has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Kroger go up and down completely randomly.

Pair Corralation between Walgreens Boots and Kroger

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the Kroger. In addition to that, Walgreens Boots is 1.41 times more volatile than Kroger Company. It trades about -0.07 of its total potential returns per unit of risk. Kroger Company is currently generating about 0.03 per unit of volatility. If you would invest  4,820  in Kroger Company on February 12, 2024 and sell it today you would earn a total of  770.00  from holding Kroger Company or generate 15.98% return on investment over 90 days.

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

Walgreens Boots Alliance  vs.  Kroger Company

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 June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Kroger Company

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kroger Company are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Kroger reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walgreens Boots and Kroger

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

The idea behind Walgreens Boots Alliance and Kroger Company 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.