Correlation Between Walgreens Boots and JAMES HARDIE

Can any of the company-specific risk be diversified away by investing in both Walgreens Boots and JAMES HARDIE 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 JAMES HARDIE 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 JAMES HARDIE INDUSTADR1, you can compare the effects of market volatilities on Walgreens Boots and JAMES HARDIE 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 JAMES HARDIE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walgreens Boots and JAMES HARDIE.

Diversification Opportunities for Walgreens Boots and JAMES HARDIE

0.14

Correlation Coefficient

Walgreens Boots  JAMES HARDIE

Average diversification

The 3 months correlation between Walgreens and JAMES is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and JAMES HARDIE INDUSTADR1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAMES HARDIE INDUSTADR1 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 JAMES HARDIE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAMES HARDIE INDUSTADR1 has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and JAMES HARDIE go up and down completely randomly.

Pair Corralation between Walgreens Boots and JAMES HARDIE

Considering the 90-day investment horizon Walgreens Boots is expected to generate 1.71 times less return on investment than JAMES HARDIE. But when comparing it to its historical volatility, Walgreens Boots Alliance is 1.72 times less risky than JAMES HARDIE. It trades about 0.2 of its potential returns per unit of risk. JAMES HARDIE INDUSTADR1 is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,300  in JAMES HARDIE INDUSTADR1 on September 20, 2024 and sell it today you would earn a total of  840.00  from holding JAMES HARDIE INDUSTADR1 or generate 36.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Walgreens Boots Alliance  vs.  JAMES HARDIE INDUSTADR1

Walgreens Boots Alliance

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, Walgreens Boots sustained solid returns over the last few months and may actually be approaching a breakup point.

JAMES HARDIE INDUSTADR1

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JAMES HARDIE INDUSTADR1 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, JAMES HARDIE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Walgreens Boots and JAMES HARDIE

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

The idea behind Walgreens Boots Alliance and JAMES HARDIE INDUSTADR1 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.