Correlation Between Walgreens Boots and Sinotrans

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

Diversification Opportunities for Walgreens Boots and Sinotrans

0.4
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Walgreens and Sinotrans is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Sinotrans Ltd Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinotrans Class 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 Sinotrans. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinotrans Class has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Sinotrans go up and down completely randomly.

Pair Corralation between Walgreens Boots and Sinotrans

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to generate 1.86 times more return on investment than Sinotrans. However, Walgreens Boots is 1.86 times more volatile than Sinotrans Ltd Class. It trades about 0.07 of its potential returns per unit of risk. Sinotrans Ltd Class is currently generating about 0.09 per unit of risk. If you would invest  831.00  in Walgreens Boots Alliance on September 23, 2024 and sell it today you would earn a total of  124.00  from holding Walgreens Boots Alliance or generate 14.92% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy93.85%
ValuesDaily Returns

Walgreens Boots Alliance  vs.  Sinotrans Ltd Class

 Performance 
       Timeline  
Walgreens Boots Alliance 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
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.
Sinotrans Class 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Sinotrans Ltd Class are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sinotrans sustained solid returns over the last few months and may actually be approaching a breakup point.

Walgreens Boots and Sinotrans Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Walgreens Boots and Sinotrans

The main advantage of trading using opposite Walgreens Boots and Sinotrans positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walgreens Boots position performs unexpectedly, Sinotrans 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 Sinotrans will offset losses from the drop in Sinotrans' long position.
The idea behind Walgreens Boots Alliance and Sinotrans Ltd Class 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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