Correlation Between Walgreens Boots and Shan Dong

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

Diversification Opportunities for Walgreens Boots and Shan Dong

0.4

Correlation Coefficient

Walgreens Boots  Shan Dong

Very weak diversification

The 3 months correlation between Walgreens and Shan is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Shan Dong Dong E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shan Dong Dong 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 Shan Dong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shan Dong Dong has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Shan Dong go up and down completely randomly.

Pair Corralation between Walgreens Boots and Shan Dong

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the Shan Dong. In addition to that, Walgreens Boots is 1.34 times more volatile than Shan Dong Dong E. It trades about -0.07 of its total potential returns per unit of risk. Shan Dong Dong E is currently generating about 0.06 per unit of volatility. If you would invest  3,782  in Shan Dong Dong E on September 20, 2024 and sell it today you would earn a total of  2,158  from holding Shan Dong Dong E or generate 57.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.17%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Shan Dong Dong E

Walgreens Boots Alliance

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, Walgreens Boots sustained solid returns over the last few months and may actually be approaching a breakup point.

Shan Dong Dong

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shan Dong Dong E are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shan Dong sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walgreens Boots and Shan Dong

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

The idea behind Walgreens Boots Alliance and Shan Dong Dong E 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.