Correlation Between Industrial and AstraZeneca PLC

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

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

Diversification Opportunities for Industrial and AstraZeneca PLC

-0.45

Correlation Coefficient

Industrial  AstraZeneca PLC

Very good diversification

The 3 months correlation between Industrial and AstraZeneca is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and AstraZeneca PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC and Industrial 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 Industrial and Commercial 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 Industrial i.e., Industrial and AstraZeneca PLC go up and down completely randomly.

Pair Corralation between Industrial and AstraZeneca PLC

Assuming the 90 days horizon Industrial is expected to generate 1.52 times less return on investment than AstraZeneca PLC. In addition to that, Industrial is 2.04 times more volatile than AstraZeneca PLC. It trades about 0.07 of its total potential returns per unit of risk. AstraZeneca PLC is currently generating about 0.23 per unit of volatility. If you would invest  11,975  in AstraZeneca PLC on September 17, 2024 and sell it today you would earn a total of  780.00  from holding AstraZeneca PLC or generate 6.51% return on investment over 90 days.

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

Industrial and Commercial  vs.  AstraZeneca PLC

Industrial and Commercial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Industrial reported solid returns over the last few months and may actually be approaching a breakup point.

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 latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Industrial and AstraZeneca PLC

The main advantage of trading using opposite Industrial and AstraZeneca PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial 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 Industrial and Commercial 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.