Correlation Between River and AstraZeneca PLC

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

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

Diversification Opportunities for River and AstraZeneca PLC

-0.4

Correlation Coefficient

River  AstraZeneca PLC

Very good diversification

The 3 months correlation between River and AstraZeneca is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding River and Mercantile and AstraZeneca PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC and River 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 River and Mercantile 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 River i.e., River and AstraZeneca PLC go up and down completely randomly.

Pair Corralation between River and AstraZeneca PLC

Assuming the 90 days trading horizon River and Mercantile is expected to generate 0.56 times more return on investment than AstraZeneca PLC. However, River and Mercantile is 1.77 times less risky than AstraZeneca PLC. It trades about -0.02 of its potential returns per unit of risk. AstraZeneca PLC is currently generating about -0.11 per unit of risk. If you would invest  18,000  in River and Mercantile on September 14, 2024 and sell it today you would lose (250.00) from holding River and Mercantile or give up 1.39% of portfolio value over 90 days.

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

River and Mercantile  vs.  AstraZeneca PLC

River and Mercantile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days River and Mercantile has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, River is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with River and AstraZeneca PLC

The main advantage of trading using opposite River and AstraZeneca PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if River 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 River and Mercantile 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.