Correlation Between Walgreens Boots and GEELY AUTOMOBILE

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

Diversification Opportunities for Walgreens Boots and GEELY AUTOMOBILE

0.43

Correlation Coefficient

Walgreens Boots  GEELY AUTOMOBILE

Very weak diversification

The 3 months correlation between Walgreens and GEELY is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and GEELY AUTOMOBILE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEELY AUTOMOBILE 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 GEELY AUTOMOBILE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEELY AUTOMOBILE has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and GEELY AUTOMOBILE go up and down completely randomly.

Pair Corralation between Walgreens Boots and GEELY AUTOMOBILE

Assuming the 90 days horizon Walgreens Boots is expected to generate 4.45 times less return on investment than GEELY AUTOMOBILE. But when comparing it to its historical volatility, Walgreens Boots Alliance is 1.21 times less risky than GEELY AUTOMOBILE. It trades about 0.06 of its potential returns per unit of risk. GEELY AUTOMOBILE is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  102.00  in GEELY AUTOMOBILE on September 3, 2024 and sell it today you would earn a total of  66.00  from holding GEELY AUTOMOBILE or generate 64.71% return on investment over 90 days.

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

Walgreens Boots Alliance  vs.  GEELY AUTOMOBILE

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

GEELY AUTOMOBILE

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GEELY AUTOMOBILE are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, GEELY AUTOMOBILE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walgreens Boots and GEELY AUTOMOBILE

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

The idea behind Walgreens Boots Alliance and GEELY AUTOMOBILE 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.