Correlation Between Walgreens Boots and Me Lin

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

Diversification Opportunities for Walgreens Boots and Me Lin

-0.22

Correlation Coefficient

Walgreens Boots  Me Lin

Very good diversification

The 3 months correlation between Walgreens and MEL is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Me Lin Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Me Lin Steel 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 Me Lin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Me Lin Steel has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Me Lin go up and down completely randomly.

Pair Corralation between Walgreens Boots and Me Lin

Considering the 90-day investment horizon Walgreens Boots is expected to generate 3.09 times less return on investment than Me Lin. But when comparing it to its historical volatility, Walgreens Boots Alliance is 1.53 times less risky than Me Lin. It trades about 0.06 of its potential returns per unit of risk. Me Lin Steel is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  600,000  in Me Lin Steel on September 29, 2024 and sell it today you would earn a total of  130,000  from holding Me Lin Steel or generate 21.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	57.14%
Values	Daily Returns

Walgreens Boots Alliance  vs.  Me Lin Steel

Walgreens Boots Alliance

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 4 (%) 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.

Me Lin Steel

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Me Lin Steel are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Me Lin displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walgreens Boots and Me Lin

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

The idea behind Walgreens Boots Alliance and Me Lin Steel 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 CEOs Directory module to screen CEOs from public companies around the world.