Correlation Between Apple and AstraZeneca PLC

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

By analyzing existing cross correlation between Apple Inc and AstraZeneca PLC, you can compare the effects of market volatilities on Apple and AstraZeneca PLC 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 Apple with a short position of AstraZeneca PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and AstraZeneca PLC.

Diversification Opportunities for Apple and AstraZeneca PLC

-0.49

Correlation Coefficient

Apple  AstraZeneca PLC

Very good diversification

The 3 months correlation between Apple and AstraZeneca is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and AstraZeneca PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC and Apple 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 Apple Inc are associated (or correlated) with AstraZeneca PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AstraZeneca PLC has no effect on the direction of Apple i.e., Apple and AstraZeneca PLC go up and down completely randomly.

Pair Corralation between Apple and AstraZeneca PLC

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.66 times more return on investment than AstraZeneca PLC. However, Apple Inc is 1.51 times less risky than AstraZeneca PLC. It trades about 0.08 of its potential returns per unit of risk. AstraZeneca PLC is currently generating about -0.14 per unit of risk. If you would invest  453,494  in Apple Inc on September 1, 2024 and sell it today you would earn a total of  31,506  from holding Apple Inc or generate 6.95% return on investment over 90 days.

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

Apple Inc  vs.  AstraZeneca PLC

Apple Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in December 2024.

AstraZeneca PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AstraZeneca PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Apple and AstraZeneca PLC

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

The idea behind Apple Inc and AstraZeneca PLC 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.