Correlation Between Walgreens Boots and Jiangsu Zhongtian

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

Diversification Opportunities for Walgreens Boots and Jiangsu Zhongtian

0.22

Correlation Coefficient

Walgreens Boots  Jiangsu Zhongtian

Modest diversification

The 3 months correlation between Walgreens and Jiangsu is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Jiangsu Zhongtian Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Zhongtian 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 Jiangsu Zhongtian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Zhongtian has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Jiangsu Zhongtian go up and down completely randomly.

Pair Corralation between Walgreens Boots and Jiangsu Zhongtian

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the Jiangsu Zhongtian. In addition to that, Walgreens Boots is 1.31 times more volatile than Jiangsu Zhongtian Technology. It trades about -0.05 of its total potential returns per unit of risk. Jiangsu Zhongtian Technology is currently generating about 0.03 per unit of volatility. If you would invest  1,424  in Jiangsu Zhongtian Technology on September 14, 2024 and sell it today you would earn a total of  138.00  from holding Jiangsu Zhongtian Technology or generate 9.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.65%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Jiangsu Zhongtian Technology

Walgreens Boots Alliance

Risk-Adjusted Performance

6 of 100

Insignificant

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.

Jiangsu Zhongtian

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Zhongtian Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Zhongtian sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walgreens Boots and Jiangsu Zhongtian

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

The idea behind Walgreens Boots Alliance and Jiangsu Zhongtian 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..