Correlation Between Walgreens Boots and XTL Biopharmaceutica

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

Diversification Opportunities for Walgreens Boots and XTL Biopharmaceutica

-0.2

Correlation Coefficient

Walgreens Boots  XTL Biopharmaceutica

Good diversification

The 3 months correlation between Walgreens and XTL is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and XTL Biopharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XTL Biopharmaceuticals 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 XTL Biopharmaceutica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XTL Biopharmaceuticals has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and XTL Biopharmaceutica go up and down completely randomly.

Pair Corralation between Walgreens Boots and XTL Biopharmaceutica

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to generate 1.2 times more return on investment than XTL Biopharmaceutica. However, Walgreens Boots is 1.2 times more volatile than XTL Biopharmaceuticals. It trades about 0.04 of its potential returns per unit of risk. XTL Biopharmaceuticals is currently generating about -0.13 per unit of risk. If you would invest  906.00  in Walgreens Boots Alliance on September 26, 2024 and sell it today you would earn a total of  13.00  from holding Walgreens Boots Alliance or generate 1.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.71%
Values	Daily Returns

Walgreens Boots Alliance  vs.  XTL Biopharmaceuticals

Walgreens Boots Alliance

Risk-Adjusted Performance

4 of 100

Modest

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.

XTL Biopharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XTL Biopharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Walgreens Boots and XTL Biopharmaceutica

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

The idea behind Walgreens Boots Alliance and XTL Biopharmaceuticals 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.