Correlation Between Walgreens Boots and Raia Drogasil

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

Diversification Opportunities for Walgreens Boots and Raia Drogasil

-0.26

Correlation Coefficient

Walgreens Boots  Raia Drogasil

Very good diversification

The 3 months correlation between Walgreens and Raia is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Raia Drogasil SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raia Drogasil SA 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 Raia Drogasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raia Drogasil SA has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Raia Drogasil go up and down completely randomly.

Pair Corralation between Walgreens Boots and Raia Drogasil

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to generate 0.75 times more return on investment than Raia Drogasil. However, Walgreens Boots Alliance is 1.33 times less risky than Raia Drogasil. It trades about 0.03 of its potential returns per unit of risk. Raia Drogasil SA is currently generating about -0.06 per unit of risk. If you would invest  871.00  in Walgreens Boots Alliance on September 2, 2024 and sell it today you would earn a total of  31.00  from holding Walgreens Boots Alliance or generate 3.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Raia Drogasil SA

Walgreens Boots Alliance

Risk-Adjusted Performance

2 of 100

Weak

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 uncertain fundamental drivers, Walgreens Boots may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Raia Drogasil SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raia Drogasil SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Walgreens Boots and Raia Drogasil

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

The idea behind Walgreens Boots Alliance and Raia Drogasil SA 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.