Correlation Between Singapore Airlines and Walgreens Boots

Can any of the company-specific risk be diversified away by investing in both Singapore Airlines and Walgreens Boots 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 Singapore Airlines and Walgreens Boots into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Singapore Airlines Limited and Walgreens Boots Alliance, you can compare the effects of market volatilities on Singapore Airlines and Walgreens Boots 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 Singapore Airlines with a short position of Walgreens Boots. Check out your portfolio center. Please also check ongoing floating volatility patterns of Singapore Airlines and Walgreens Boots.

Diversification Opportunities for Singapore Airlines and Walgreens Boots

-0.09

Correlation Coefficient

Singapore Airlines  Walgreens Boots

Good diversification

The 3 months correlation between Singapore and Walgreens is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Airlines Limited and Walgreens Boots Alliance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walgreens Boots Alliance and Singapore Airlines 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 Singapore Airlines Limited are associated (or correlated) with Walgreens Boots. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walgreens Boots Alliance has no effect on the direction of Singapore Airlines i.e., Singapore Airlines and Walgreens Boots go up and down completely randomly.

Pair Corralation between Singapore Airlines and Walgreens Boots

Assuming the 90 days trading horizon Singapore Airlines Limited is expected to generate 0.52 times more return on investment than Walgreens Boots. However, Singapore Airlines Limited is 1.93 times less risky than Walgreens Boots. It trades about 0.06 of its potential returns per unit of risk. Walgreens Boots Alliance is currently generating about -0.08 per unit of risk. If you would invest  318.00  in Singapore Airlines Limited on September 14, 2024 and sell it today you would earn a total of  130.00  from holding Singapore Airlines Limited or generate 40.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Singapore Airlines Limited  vs.  Walgreens Boots Alliance

Singapore Airlines

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Airlines Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Singapore Airlines is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Walgreens Boots Alliance

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Walgreens Boots exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Singapore Airlines and Walgreens Boots

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

The idea behind Singapore Airlines Limited and Walgreens Boots Alliance 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.