Correlation Between Walgreens Boots and Sekar Bumi

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

Diversification Opportunities for Walgreens Boots and Sekar Bumi

0.32
  Correlation Coefficient

Weak diversification

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

Pair Corralation between Walgreens Boots and Sekar Bumi

Considering the 90-day investment horizon Walgreens Boots is expected to generate 3.77 times less return on investment than Sekar Bumi. But when comparing it to its historical volatility, Walgreens Boots Alliance is 1.78 times less risky than Sekar Bumi. It trades about 0.08 of its potential returns per unit of risk. Sekar Bumi Tbk is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  31,600  in Sekar Bumi Tbk on September 18, 2024 and sell it today you would earn a total of  27,400  from holding Sekar Bumi Tbk or generate 86.71% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy98.44%
ValuesDaily Returns

Walgreens Boots Alliance  vs.  Sekar Bumi Tbk

 Performance 
       Timeline  
Walgreens Boots Alliance 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
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 weak fundamental drivers, Walgreens Boots sustained solid returns over the last few months and may actually be approaching a breakup point.
Sekar Bumi Tbk 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Sekar Bumi Tbk are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Sekar Bumi disclosed solid returns over the last few months and may actually be approaching a breakup point.

Walgreens Boots and Sekar Bumi Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Walgreens Boots and Sekar Bumi

The main advantage of trading using opposite Walgreens Boots and Sekar Bumi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walgreens Boots position performs unexpectedly, Sekar Bumi 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 Sekar Bumi will offset losses from the drop in Sekar Bumi's long position.
The idea behind Walgreens Boots Alliance and Sekar Bumi Tbk 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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