Correlation Between Walgreens Boots and Bannerman Resources

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

Diversification Opportunities for Walgreens Boots and Bannerman Resources

0.18

Correlation Coefficient

Walgreens Boots  Bannerman Resources

Average diversification

The 3 months correlation between Walgreens and Bannerman is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Bannerman Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bannerman Resources 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 Bannerman Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bannerman Resources has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Bannerman Resources go up and down completely randomly.

Pair Corralation between Walgreens Boots and Bannerman Resources

Considering the 90-day investment horizon Walgreens Boots is expected to generate 1.28 times less return on investment than Bannerman Resources. In addition to that, Walgreens Boots is 1.01 times more volatile than Bannerman Resources Limited. It trades about 0.06 of its total potential returns per unit of risk. Bannerman Resources Limited is currently generating about 0.08 per unit of volatility. If you would invest  149.00  in Bannerman Resources Limited on September 19, 2024 and sell it today you would earn a total of  25.00  from holding Bannerman Resources Limited or generate 16.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Bannerman Resources Limited

Walgreens Boots Alliance

Risk-Adjusted Performance

4 of 100

Modest

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.

Bannerman Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bannerman Resources Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bannerman Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walgreens Boots and Bannerman Resources

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

The idea behind Walgreens Boots Alliance and Bannerman Resources 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.