Correlation Between Walgreens Boots and Zhejiang Crystal

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

Diversification Opportunities for Walgreens Boots and Zhejiang Crystal

0.24

Correlation Coefficient

Walgreens Boots  Zhejiang Crystal

Modest diversification

The 3 months correlation between Walgreens and Zhejiang is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Zhejiang Crystal Optech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Crystal Optech 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 Zhejiang Crystal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Crystal Optech has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Zhejiang Crystal go up and down completely randomly.

Pair Corralation between Walgreens Boots and Zhejiang Crystal

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to generate 1.93 times more return on investment than Zhejiang Crystal. However, Walgreens Boots is 1.93 times more volatile than Zhejiang Crystal Optech. It trades about 0.16 of its potential returns per unit of risk. Zhejiang Crystal Optech is currently generating about -0.02 per unit of risk. If you would invest  866.00  in Walgreens Boots Alliance on September 19, 2024 and sell it today you would earn a total of  131.00  from holding Walgreens Boots Alliance or generate 15.13% return on investment over 90 days.

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

Walgreens Boots Alliance  vs.  Zhejiang Crystal Optech

Walgreens Boots Alliance

Risk-Adjusted Performance

5 of 100

Modest

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. Despite somewhat weak fundamental drivers, Walgreens Boots sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhejiang Crystal Optech

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Walgreens Boots and Zhejiang Crystal

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

The idea behind Walgreens Boots Alliance and Zhejiang Crystal Optech 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.