Correlation Between China Jo and Walgreens Boots

Can any of the company-specific risk be diversified away by investing in both China Jo and Walgreens Boots 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 China Jo and Walgreens Boots into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Jo Jo Drugstores and Walgreens Boots Alliance, you can compare the effects of market volatilities on China Jo and Walgreens Boots 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 China Jo with a short position of Walgreens Boots. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Jo and Walgreens Boots.

Diversification Opportunities for China Jo and Walgreens Boots

0.6

Correlation Coefficient

China Jo  Walgreens Boots

Poor diversification

The 3 months correlation between China and Walgreens is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding China Jo Jo Drugstores and Walgreens Boots Alliance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walgreens Boots Alliance and China Jo 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 China Jo Jo Drugstores are associated (or correlated) with Walgreens Boots. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walgreens Boots Alliance has no effect on the direction of China Jo i.e., China Jo and Walgreens Boots go up and down completely randomly.

Pair Corralation between China Jo and Walgreens Boots

Given the investment horizon of 90 days China Jo Jo Drugstores is expected to under-perform the Walgreens Boots. In addition to that, China Jo is 1.3 times more volatile than Walgreens Boots Alliance. It trades about -0.24 of its total potential returns per unit of risk. Walgreens Boots Alliance is currently generating about -0.23 per unit of volatility. If you would invest  1,954  in Walgreens Boots Alliance on January 31, 2024 and sell it today you would lose (184.00) from holding Walgreens Boots Alliance or give up 9.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

China Jo Jo Drugstores  vs.  Walgreens Boots Alliance

China Jo Jo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Jo Jo Drugstores has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward-looking indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Walgreens Boots Alliance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Walgreens Boots Alliance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with China Jo and Walgreens Boots

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

The idea behind China Jo Jo Drugstores and Walgreens Boots Alliance 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.