Correlation Between Walgreens Boots and Chung Hwa

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

Diversification Opportunities for Walgreens Boots and Chung Hwa

-0.59

Correlation Coefficient

Walgreens Boots  Chung Hwa

Excellent diversification

The 3 months correlation between Walgreens and Chung is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Chung Hwa Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chung Hwa Food 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 Chung Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chung Hwa Food has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Chung Hwa go up and down completely randomly.

Pair Corralation between Walgreens Boots and Chung Hwa

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the Chung Hwa. In addition to that, Walgreens Boots is 6.08 times more volatile than Chung Hwa Food. It trades about -0.05 of its total potential returns per unit of risk. Chung Hwa Food is currently generating about -0.05 per unit of volatility. If you would invest  9,692  in Chung Hwa Food on October 23, 2024 and sell it today you would lose (1,092) from holding Chung Hwa Food or give up 11.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.58%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Chung Hwa Food

Walgreens Boots Alliance

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 10 (%) 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.

Chung Hwa Food

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chung Hwa Food has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chung Hwa is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Walgreens Boots and Chung Hwa

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

The idea behind Walgreens Boots Alliance and Chung Hwa Food 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.