Correlation Between Walgreens Boots and Oriental Precision

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

Diversification Opportunities for Walgreens Boots and Oriental Precision

0.01

Correlation Coefficient

Walgreens Boots  Oriental Precision

Significant diversification

The 3 months correlation between Walgreens and Oriental is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Oriental Precision Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oriental Precision 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 Oriental Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oriental Precision has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Oriental Precision go up and down completely randomly.

Pair Corralation between Walgreens Boots and Oriental Precision

Considering the 90-day investment horizon Walgreens Boots is expected to generate 1.49 times less return on investment than Oriental Precision. In addition to that, Walgreens Boots is 1.05 times more volatile than Oriental Precision Engineering. It trades about 0.07 of its total potential returns per unit of risk. Oriental Precision Engineering is currently generating about 0.11 per unit of volatility. If you would invest  418,000  in Oriental Precision Engineering on September 23, 2024 and sell it today you would earn a total of  108,000  from holding Oriental Precision Engineering or generate 25.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Oriental Precision Engineering

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.

Oriental Precision

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oriental Precision Engineering are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Oriental Precision sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walgreens Boots and Oriental Precision

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

The idea behind Walgreens Boots Alliance and Oriental Precision Engineering 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.