Correlation Between Walgreens Boots and Shenzhen RoadRover

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

Diversification Opportunities for Walgreens Boots and Shenzhen RoadRover

0.24

Correlation Coefficient

Walgreens Boots  Shenzhen RoadRover

Modest diversification

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

Pair Corralation between Walgreens Boots and Shenzhen RoadRover

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to generate 1.66 times more return on investment than Shenzhen RoadRover. However, Walgreens Boots is 1.66 times more volatile than Shenzhen RoadRover Technology. It trades about 0.01 of its potential returns per unit of risk. Shenzhen RoadRover Technology is currently generating about -0.06 per unit of risk. If you would invest  1,014  in Walgreens Boots Alliance on September 19, 2024 and sell it today you would lose (20.00) from holding Walgreens Boots Alliance or give up 1.97% of portfolio value over 90 days.

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

Walgreens Boots Alliance  vs.  Shenzhen RoadRover Technology

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.

Shenzhen RoadRover

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen RoadRover Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen RoadRover sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walgreens Boots and Shenzhen RoadRover

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

The idea behind Walgreens Boots Alliance and Shenzhen RoadRover Technology 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.