Correlation Between Walgreens Boots and Senci Electric

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

Diversification Opportunities for Walgreens Boots and Senci Electric

0.32

Correlation Coefficient

Walgreens Boots  Senci Electric

Weak diversification

The 3 months correlation between Walgreens and Senci is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Senci Electric Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senci Electric Machinery 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 Senci Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senci Electric Machinery has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Senci Electric go up and down completely randomly.

Pair Corralation between Walgreens Boots and Senci Electric

Considering the 90-day investment horizon Walgreens Boots is expected to generate 2.89 times less return on investment than Senci Electric. In addition to that, Walgreens Boots is 1.37 times more volatile than Senci Electric Machinery. It trades about 0.04 of its total potential returns per unit of risk. Senci Electric Machinery is currently generating about 0.14 per unit of volatility. If you would invest  1,375  in Senci Electric Machinery on September 27, 2024 and sell it today you would earn a total of  358.00  from holding Senci Electric Machinery or generate 26.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.65%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Senci Electric Machinery

Walgreens Boots Alliance

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Walgreens Boots may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Senci Electric Machinery

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Senci Electric Machinery are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Senci Electric sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walgreens Boots and Senci Electric

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

The idea behind Walgreens Boots Alliance and Senci Electric Machinery 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..