Correlation Between Walgreens Boots and Tsinghuatongfang

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

Diversification Opportunities for Walgreens Boots and Tsinghuatongfang

0.29

Correlation Coefficient

Walgreens Boots  Tsinghuatongfang

Modest diversification

The 3 months correlation between Walgreens and Tsinghuatongfang is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Tsinghuatongfang Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsinghuatongfang 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 Tsinghuatongfang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsinghuatongfang has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Tsinghuatongfang go up and down completely randomly.

Pair Corralation between Walgreens Boots and Tsinghuatongfang

Considering the 90-day investment horizon Walgreens Boots is expected to generate 2.26 times less return on investment than Tsinghuatongfang. In addition to that, Walgreens Boots is 1.1 times more volatile than Tsinghuatongfang Co. It trades about 0.07 of its total potential returns per unit of risk. Tsinghuatongfang Co is currently generating about 0.18 per unit of volatility. If you would invest  527.00  in Tsinghuatongfang Co on September 24, 2024 and sell it today you would earn a total of  237.00  from holding Tsinghuatongfang Co or generate 44.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.75%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Tsinghuatongfang Co

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.

Tsinghuatongfang

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tsinghuatongfang Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tsinghuatongfang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walgreens Boots and Tsinghuatongfang

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

The idea behind Walgreens Boots Alliance and Tsinghuatongfang Co 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.