Correlation Between Walgreens Boots and Mitsui Chemicals

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

Diversification Opportunities for Walgreens Boots and Mitsui Chemicals

-0.53

Correlation Coefficient

Walgreens Boots  Mitsui Chemicals

Excellent diversification

The 3 months correlation between Walgreens and Mitsui is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Mitsui Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Chemicals 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 Mitsui Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsui Chemicals has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Mitsui Chemicals go up and down completely randomly.

Pair Corralation between Walgreens Boots and Mitsui Chemicals

Assuming the 90 days horizon Walgreens Boots Alliance is expected to generate 1.4 times more return on investment than Mitsui Chemicals. However, Walgreens Boots is 1.4 times more volatile than Mitsui Chemicals. It trades about 0.07 of its potential returns per unit of risk. Mitsui Chemicals is currently generating about 0.08 per unit of risk. If you would invest  834.00  in Walgreens Boots Alliance on September 4, 2024 and sell it today you would earn a total of  30.00  from holding Walgreens Boots Alliance or generate 3.6% return on investment over 90 days.

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

Walgreens Boots Alliance  vs.  Mitsui Chemicals

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

Mitsui Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsui Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Walgreens Boots and Mitsui Chemicals

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

The idea behind Walgreens Boots Alliance and Mitsui Chemicals 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.