Correlation Between Walgreens Boots and Vipshop Holdings

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

Diversification Opportunities for Walgreens Boots and Vipshop Holdings

-0.08

Correlation Coefficient

Walgreens Boots  Vipshop Holdings

Good diversification

The 3 months correlation between Walgreens and Vipshop is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Walgreens Boots Alliance and Vipshop Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vipshop Holdings 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 Vipshop Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vipshop Holdings has no effect on the direction of Walgreens Boots i.e., Walgreens Boots and Vipshop Holdings go up and down completely randomly.

Pair Corralation between Walgreens Boots and Vipshop Holdings

Considering the 90-day investment horizon Walgreens Boots Alliance is expected to under-perform the Vipshop Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Walgreens Boots Alliance is 1.45 times less risky than Vipshop Holdings. The stock trades about -0.06 of its potential returns per unit of risk. The Vipshop Holdings Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  992.00  in Vipshop Holdings Limited on January 25, 2024 and sell it today you would earn a total of  589.00  from holding Vipshop Holdings Limited or generate 59.38% return on investment over 90 days.

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

Walgreens Boots Alliance  vs.  Vipshop Holdings Limited

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.

Vipshop Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vipshop Holdings Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Vipshop Holdings is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Walgreens Boots and Vipshop Holdings

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

The idea behind Walgreens Boots Alliance and Vipshop Holdings Limited 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.