Correlation Between Walgreens Boots and Banka BioLoo

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

Diversification Opportunities for Walgreens Boots and Banka BioLoo

0.16

Correlation Coefficient

Walgreens Boots  Banka BioLoo

Average diversification

The 3 months correlation between Walgreens and Banka is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Banka BioLoo Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banka BioLoo Limited 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 Banka BioLoo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banka BioLoo Limited has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Banka BioLoo go up and down completely randomly.

Pair Corralation between Walgreens Boots and Banka BioLoo

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the Banka BioLoo. But the stock apears to be less risky and, when comparing its historical volatility, Walgreens Boots Alliance is 1.05 times less risky than Banka BioLoo. The stock trades about -0.08 of its potential returns per unit of risk. The Banka BioLoo Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  8,095  in Banka BioLoo Limited on September 26, 2024 and sell it today you would earn a total of  2,123  from holding Banka BioLoo Limited or generate 26.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.53%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Banka BioLoo Limited

Walgreens Boots Alliance

Risk-Adjusted Performance

4 of 100

Insignificant

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.

Banka BioLoo Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banka BioLoo Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Walgreens Boots and Banka BioLoo

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

The idea behind Walgreens Boots Alliance and Banka BioLoo Limited 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.