Correlation Between Walgreens Boots and Tata Motors

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

Diversification Opportunities for Walgreens Boots and Tata Motors

0.03

Correlation Coefficient

Walgreens Boots  Tata Motors

Significant diversification

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

Pair Corralation between Walgreens Boots and Tata Motors

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the Tata Motors. In addition to that, Walgreens Boots is 1.69 times more volatile than Tata Motors Limited. It trades about -0.07 of its total potential returns per unit of risk. Tata Motors Limited is currently generating about 0.09 per unit of volatility. If you would invest  41,035  in Tata Motors Limited on October 7, 2024 and sell it today you would earn a total of  38,005  from holding Tata Motors Limited or generate 92.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.59%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Tata Motors Limited

Walgreens Boots Alliance

Risk-Adjusted Performance

4 of 100

Insignificant

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 uncertain fundamental drivers, Walgreens Boots sustained solid returns over the last few months and may actually be approaching a breakup point.

Tata Motors Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tata Motors Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Walgreens Boots and Tata Motors

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

The idea behind Walgreens Boots Alliance and Tata Motors Limited 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.