Correlation Between Walgreens Boots and Saigon Machinery

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

Diversification Opportunities for Walgreens Boots and Saigon Machinery

0.4

Correlation Coefficient

Walgreens Boots  Saigon Machinery

Very weak diversification

The 3 months correlation between Walgreens and Saigon is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Saigon Machinery Spare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saigon Machinery Spare 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 Saigon Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saigon Machinery Spare has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Saigon Machinery go up and down completely randomly.

Pair Corralation between Walgreens Boots and Saigon Machinery

Considering the 90-day investment horizon Walgreens Boots is expected to generate 2.94 times less return on investment than Saigon Machinery. In addition to that, Walgreens Boots is 1.99 times more volatile than Saigon Machinery Spare. It trades about 0.12 of its total potential returns per unit of risk. Saigon Machinery Spare is currently generating about 0.68 per unit of volatility. If you would invest  1,015,000  in Saigon Machinery Spare on September 23, 2024 and sell it today you would earn a total of  125,000  from holding Saigon Machinery Spare or generate 12.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	33.33%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Saigon Machinery Spare

Walgreens Boots Alliance

Risk-Adjusted Performance

5 of 100

Modest

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.

Saigon Machinery Spare

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Saigon Machinery Spare are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Saigon Machinery displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walgreens Boots and Saigon Machinery

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

The idea behind Walgreens Boots Alliance and Saigon Machinery Spare 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.