Correlation Between AstraZeneca PLC and Orrn Energy

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

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

Diversification Opportunities for AstraZeneca PLC and Orrn Energy

0.75

Correlation Coefficient

AstraZeneca PLC  Orrn Energy

Poor diversification

The 3 months correlation between AstraZeneca and Orrn is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding AstraZeneca PLC and Orrn Energy AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orrn Energy AB and AstraZeneca PLC 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 AstraZeneca PLC are associated (or correlated) with Orrn Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orrn Energy AB has no effect on the direction of AstraZeneca PLC i.e., AstraZeneca PLC and Orrn Energy go up and down completely randomly.

Pair Corralation between AstraZeneca PLC and Orrn Energy

Assuming the 90 days trading horizon AstraZeneca PLC is expected to generate 0.74 times more return on investment than Orrn Energy. However, AstraZeneca PLC is 1.36 times less risky than Orrn Energy. It trades about -0.18 of its potential returns per unit of risk. Orrn Energy AB is currently generating about -0.13 per unit of risk. If you would invest  178,100  in AstraZeneca PLC on September 3, 2024 and sell it today you would lose (31,000) from holding AstraZeneca PLC or give up 17.41% of portfolio value over 90 days.

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

AstraZeneca PLC  vs.  Orrn Energy AB

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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Orrn Energy AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orrn Energy AB 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 basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with AstraZeneca PLC and Orrn Energy

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

The idea behind AstraZeneca PLC and Orrn Energy AB 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.