Correlation Between Walgreens Boots and Ezz Steel

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

Diversification Opportunities for Walgreens Boots and Ezz Steel

-0.03

Correlation Coefficient

Walgreens Boots  Ezz Steel

Good diversification

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

Pair Corralation between Walgreens Boots and Ezz Steel

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the Ezz Steel. In addition to that, Walgreens Boots is 1.17 times more volatile than Ezz Steel. It trades about -0.04 of its total potential returns per unit of risk. Ezz Steel is currently generating about 0.1 per unit of volatility. If you would invest  8,041  in Ezz Steel on September 15, 2024 and sell it today you would earn a total of  2,561  from holding Ezz Steel or generate 31.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	78.57%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Ezz Steel

Walgreens Boots Alliance

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, Walgreens Boots sustained solid returns over the last few months and may actually be approaching a breakup point.

Ezz Steel

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ezz Steel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Ezz Steel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Walgreens Boots and Ezz Steel

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

The idea behind Walgreens Boots Alliance and Ezz Steel 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.