Correlation Between Walgreens Boots and NIPPON MEAT

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

Diversification Opportunities for Walgreens Boots and NIPPON MEAT

0.21

Correlation Coefficient

Walgreens Boots  NIPPON MEAT

Modest diversification

The 3 months correlation between Walgreens and NIPPON is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and NIPPON MEAT PACKERS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIPPON MEAT PACKERS 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 NIPPON MEAT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIPPON MEAT PACKERS has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and NIPPON MEAT go up and down completely randomly.

Pair Corralation between Walgreens Boots and NIPPON MEAT

Assuming the 90 days horizon Walgreens Boots Alliance is expected to generate 3.04 times more return on investment than NIPPON MEAT. However, Walgreens Boots is 3.04 times more volatile than NIPPON MEAT PACKERS. It trades about 0.06 of its potential returns per unit of risk. NIPPON MEAT PACKERS is currently generating about 0.04 per unit of risk. If you would invest  921.00  in Walgreens Boots Alliance on December 30, 2024 and sell it today you would earn a total of  109.00  from holding Walgreens Boots Alliance or generate 11.83% return on investment over 90 days.

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

Walgreens Boots Alliance  vs.  NIPPON MEAT PACKERS

Walgreens Boots Alliance

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Walgreens Boots reported solid returns over the last few months and may actually be approaching a breakup point.

NIPPON MEAT PACKERS

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NIPPON MEAT PACKERS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, NIPPON MEAT is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Walgreens Boots and NIPPON MEAT

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

The idea behind Walgreens Boots Alliance and NIPPON MEAT PACKERS 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.