Correlation Between Walgreens Boots and High Tide

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

Diversification Opportunities for Walgreens Boots and High Tide

-0.72

Correlation Coefficient

Walgreens Boots  High Tide

Pay attention - limited upside

The 3 months correlation between Walgreens and High is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and High Tide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Tide 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 High Tide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Tide has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and High Tide go up and down completely randomly.

Pair Corralation between Walgreens Boots and High Tide

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the High Tide. But the stock apears to be less risky and, when comparing its historical volatility, Walgreens Boots Alliance is 2.92 times less risky than High Tide. The stock trades about -0.23 of its potential returns per unit of risk. The High Tide is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  196.00  in High Tide on January 30, 2024 and sell it today you would lose (1.00) from holding High Tide or give up 0.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Walgreens Boots Alliance  vs.  High Tide

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.

High Tide

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in High Tide are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, High Tide may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Walgreens Boots and High Tide

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

The idea behind Walgreens Boots Alliance and High Tide 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.