Correlation Between AstraZeneca PLC and Diadrom Holding
Can any of the company-specific risk be diversified away by investing in both AstraZeneca PLC and Diadrom Holding 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 Diadrom Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AstraZeneca PLC and Diadrom Holding AB, you can compare the effects of market volatilities on AstraZeneca PLC and Diadrom Holding 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 Diadrom Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of AstraZeneca PLC and Diadrom Holding.
Diversification Opportunities for AstraZeneca PLC and Diadrom Holding
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between AstraZeneca and Diadrom is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding AstraZeneca PLC and Diadrom Holding AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diadrom Holding 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 Diadrom Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diadrom Holding AB has no effect on the direction of AstraZeneca PLC i.e., AstraZeneca PLC and Diadrom Holding go up and down completely randomly.
Pair Corralation between AstraZeneca PLC and Diadrom Holding
Assuming the 90 days trading horizon AstraZeneca PLC is expected to generate 0.6 times more return on investment than Diadrom Holding. However, AstraZeneca PLC is 1.68 times less risky than Diadrom Holding. It trades about -0.09 of its potential returns per unit of risk. Diadrom Holding AB is currently generating about -0.2 per unit of risk. If you would invest 157,150 in AstraZeneca PLC on August 30, 2024 and sell it today you would lose (11,150) from holding AstraZeneca PLC or give up 7.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
AstraZeneca PLC vs. Diadrom Holding AB
Performance |
| Timeline |
| AstraZeneca PLC |
| Diadrom Holding AB |
AstraZeneca PLC and Diadrom Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AstraZeneca PLC and Diadrom Holding
The main advantage of trading using opposite AstraZeneca PLC and Diadrom Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AstraZeneca PLC position performs unexpectedly, Diadrom Holding 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 Diadrom Holding will offset losses from the drop in Diadrom Holding's long position.| AstraZeneca PLC vs. AB Volvo | AstraZeneca PLC vs. Telefonaktiebolaget LM Ericsson | AstraZeneca PLC vs. H M Hennes | AstraZeneca PLC vs. Investor AB ser |
| Diadrom Holding vs. Generic Sweden publ | Diadrom Holding vs. Avensia publ AB | Diadrom Holding vs. Softronic AB | Diadrom Holding vs. Drillcon AB |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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