Correlation Between H M and AstraZeneca PLC

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Can any of the company-specific risk be diversified away by investing in both H M 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 H M and AstraZeneca PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between H M Hennes and AstraZeneca PLC, you can compare the effects of market volatilities on H M 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 H M with a short position of AstraZeneca PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of H M and AstraZeneca PLC.

Diversification Opportunities for H M and AstraZeneca PLC

0.26
  Correlation Coefficient
 H M

Modest diversification

The 3 months correlation between HM-B and AstraZeneca is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding H M Hennes and AstraZeneca PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC and H M 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 H M Hennes 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 H M i.e., H M and AstraZeneca PLC go up and down completely randomly.

Pair Corralation between H M and AstraZeneca PLC

Assuming the 90 days trading horizon H M Hennes is expected to generate 0.56 times more return on investment than AstraZeneca PLC. However, H M Hennes is 1.8 times less risky than AstraZeneca PLC. It trades about -0.31 of its potential returns per unit of risk. AstraZeneca PLC is currently generating about -0.19 per unit of risk. If you would invest  16,656  in H M Hennes on August 29, 2024 and sell it today you would lose (1,391) from holding H M Hennes or give up 8.35% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

H M Hennes  vs.  AstraZeneca PLC

 Performance 
       Timeline  
H M Hennes 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days H M Hennes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, H M is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
AstraZeneca PLC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

H M and AstraZeneca PLC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with H M and AstraZeneca PLC

The main advantage of trading using opposite H M and AstraZeneca PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if H M 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.
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The idea behind H M Hennes 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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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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