Correlation Between Walgreens Boots and SBM OFFSHORE

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

Diversification Opportunities for Walgreens Boots and SBM OFFSHORE

0.3

Correlation Coefficient

Walgreens Boots  SBM OFFSHORE

Weak diversification

The 3 months correlation between Walgreens and SBM is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and SBM OFFSHORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM OFFSHORE 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 SBM OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM OFFSHORE has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and SBM OFFSHORE go up and down completely randomly.

Pair Corralation between Walgreens Boots and SBM OFFSHORE

Assuming the 90 days horizon Walgreens Boots Alliance is expected to under-perform the SBM OFFSHORE. In addition to that, Walgreens Boots is 1.85 times more volatile than SBM OFFSHORE. It trades about -0.09 of its total potential returns per unit of risk. SBM OFFSHORE is currently generating about 0.1 per unit of volatility. If you would invest  1,142  in SBM OFFSHORE on September 4, 2024 and sell it today you would earn a total of  534.00  from holding SBM OFFSHORE or generate 46.76% return on investment over 90 days.

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

Walgreens Boots Alliance  vs.  SBM OFFSHORE

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 nearly fragile basic indicators, Walgreens Boots reported solid returns over the last few months and may actually be approaching a breakup point.

SBM OFFSHORE

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SBM OFFSHORE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, SBM OFFSHORE is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Walgreens Boots and SBM OFFSHORE

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

The idea behind Walgreens Boots Alliance and SBM OFFSHORE 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.