Correlation Between Walgreens Boots and Pentamaster Bhd

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

Diversification Opportunities for Walgreens Boots and Pentamaster Bhd

0.37

Correlation Coefficient

Walgreens Boots  Pentamaster Bhd

Weak diversification

The 3 months correlation between Walgreens and Pentamaster is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Pentamaster Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentamaster Bhd 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 Pentamaster Bhd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentamaster Bhd has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Pentamaster Bhd go up and down completely randomly.

Pair Corralation between Walgreens Boots and Pentamaster Bhd

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to generate 1.18 times more return on investment than Pentamaster Bhd. However, Walgreens Boots is 1.18 times more volatile than Pentamaster Bhd. It trades about -0.01 of its potential returns per unit of risk. Pentamaster Bhd is currently generating about -0.03 per unit of risk. If you would invest  1,098  in Walgreens Boots Alliance on September 27, 2024 and sell it today you would lose (130.00) from holding Walgreens Boots Alliance or give up 11.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.21%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Pentamaster Bhd

Walgreens Boots Alliance

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 4 (%) 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.

Pentamaster Bhd

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pentamaster Bhd are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Pentamaster Bhd disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walgreens Boots and Pentamaster Bhd

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

The idea behind Walgreens Boots Alliance and Pentamaster Bhd 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.