Correlation Between Walgreens Boots and Materials Petroleum

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

Diversification Opportunities for Walgreens Boots and Materials Petroleum

-0.25

Correlation Coefficient

Walgreens Boots  Materials Petroleum

Very good diversification

The 3 months correlation between Walgreens and Materials is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Materials Petroleum JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materials Petroleum JSC 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 Materials Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materials Petroleum JSC has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Materials Petroleum go up and down completely randomly.

Pair Corralation between Walgreens Boots and Materials Petroleum

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the Materials Petroleum. But the stock apears to be less risky and, when comparing its historical volatility, Walgreens Boots Alliance is 1.65 times less risky than Materials Petroleum. The stock trades about -0.07 of its potential returns per unit of risk. The Materials Petroleum JSC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,601,673  in Materials Petroleum JSC on September 20, 2024 and sell it today you would earn a total of  163,327  from holding Materials Petroleum JSC or generate 6.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	56.45%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Materials Petroleum JSC

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.

Materials Petroleum JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Materials Petroleum JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Materials Petroleum is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Walgreens Boots and Materials Petroleum

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

The idea behind Walgreens Boots Alliance and Materials Petroleum JSC 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.