Correlation Between Walgreens Boots and BlueScope Steel

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

Diversification Opportunities for Walgreens Boots and BlueScope Steel

-0.03

Correlation Coefficient

Walgreens Boots  BlueScope Steel

Good diversification

The 3 months correlation between Walgreens and BlueScope is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and BlueScope Steel Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueScope Steel 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 BlueScope Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlueScope Steel has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and BlueScope Steel go up and down completely randomly.

Pair Corralation between Walgreens Boots and BlueScope Steel

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the BlueScope Steel. In addition to that, Walgreens Boots is 1.04 times more volatile than BlueScope Steel Ltd. It trades about -0.02 of its total potential returns per unit of risk. BlueScope Steel Ltd is currently generating about 0.0 per unit of volatility. If you would invest  6,625  in BlueScope Steel Ltd on September 27, 2024 and sell it today you would lose (325.00) from holding BlueScope Steel Ltd or give up 4.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

Walgreens Boots Alliance  vs.  BlueScope Steel Ltd

Walgreens Boots Alliance

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Walgreens Boots may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BlueScope Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlueScope Steel Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, BlueScope Steel is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Walgreens Boots and BlueScope Steel

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

The idea behind Walgreens Boots Alliance and BlueScope Steel Ltd 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.