Correlation Between Walgreens Boots and China Everbright

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

Diversification Opportunities for Walgreens Boots and China Everbright

0.42

Correlation Coefficient

Walgreens Boots  China Everbright

Very weak diversification

The 3 months correlation between Walgreens and China is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and China Everbright Environment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Everbright Env 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 China Everbright. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Everbright Env has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and China Everbright go up and down completely randomly.

Pair Corralation between Walgreens Boots and China Everbright

If you would invest  824.00  in Walgreens Boots Alliance on September 21, 2024 and sell it today you would earn a total of  111.00  from holding Walgreens Boots Alliance or generate 13.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	4.76%
Values	Daily Returns

Walgreens Boots Alliance  vs.  China Everbright Environment

Walgreens Boots Alliance

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 5 (%) 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.

China Everbright Env

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Everbright Environment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, China Everbright is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Walgreens Boots and China Everbright

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

The idea behind Walgreens Boots Alliance and China Everbright Environment 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.