Correlation Between Roche Holding and AstraZeneca PLC
Can any of the company-specific risk be diversified away by investing in both Roche Holding 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 Roche Holding and AstraZeneca PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Roche Holding AG and AstraZeneca PLC, you can compare the effects of market volatilities on Roche Holding 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 Roche Holding with a short position of AstraZeneca PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roche Holding and AstraZeneca PLC.
Diversification Opportunities for Roche Holding and AstraZeneca PLC
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Roche and AstraZeneca is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Roche Holding AG and AstraZeneca PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC and Roche Holding 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 Roche Holding AG 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 Roche Holding i.e., Roche Holding and AstraZeneca PLC go up and down completely randomly.
Pair Corralation between Roche Holding and AstraZeneca PLC
Assuming the 90 days horizon Roche Holding AG is expected to generate 0.57 times more return on investment than AstraZeneca PLC. However, Roche Holding AG is 1.76 times less risky than AstraZeneca PLC. It trades about -0.37 of its potential returns per unit of risk. AstraZeneca PLC is currently generating about -0.42 per unit of risk. If you would invest 31,374 in Roche Holding AG on August 23, 2024 and sell it today you would lose (3,271) from holding Roche Holding AG or give up 10.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Roche Holding AG vs. AstraZeneca PLC
Performance |
| Timeline |
| Roche Holding AG |
| AstraZeneca PLC |
Roche Holding and AstraZeneca PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Roche Holding and AstraZeneca PLC
The main advantage of trading using opposite Roche Holding and AstraZeneca PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roche Holding 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.| Roche Holding vs. Ono Pharmaceutical Co | Roche Holding vs. GSK plc | Roche Holding vs. Grifols SA ADR | Roche Holding vs. Pfizer Inc |
| AstraZeneca PLC vs. Ono Pharmaceutical Co | AstraZeneca PLC vs. GSK plc | AstraZeneca PLC vs. Grifols SA ADR | AstraZeneca PLC vs. Pfizer Inc |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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