Correlation Between Small Cap and AstraZeneca PLC
Can any of the company-specific risk be diversified away by investing in both Small Cap 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 Small Cap and AstraZeneca PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Core and AstraZeneca PLC ADR, you can compare the effects of market volatilities on Small Cap 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 Small Cap with a short position of AstraZeneca PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and AstraZeneca PLC.
Diversification Opportunities for Small Cap and AstraZeneca PLC
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Small and AstraZeneca is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and AstraZeneca PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC ADR and Small Cap 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 Small Cap Core 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 ADR has no effect on the direction of Small Cap i.e., Small Cap and AstraZeneca PLC go up and down completely randomly.
Pair Corralation between Small Cap and AstraZeneca PLC
Assuming the 90 days horizon Small Cap Core is expected to generate 0.94 times more return on investment than AstraZeneca PLC. However, Small Cap Core is 1.07 times less risky than AstraZeneca PLC. It trades about 0.05 of its potential returns per unit of risk. AstraZeneca PLC ADR is currently generating about 0.0 per unit of risk. If you would invest 1,124 in Small Cap Core on August 23, 2024 and sell it today you would earn a total of 314.00 from holding Small Cap Core or generate 27.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Core vs. AstraZeneca PLC ADR
Performance |
| Timeline |
| Small Cap Core |
| AstraZeneca PLC ADR |
Small Cap and AstraZeneca PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and AstraZeneca PLC
The main advantage of trading using opposite Small Cap and AstraZeneca PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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.| Small Cap vs. Vanguard Mid Cap Index | Small Cap vs. Vanguard Total Bond | Small Cap vs. Vanguard Institutional Index | Small Cap vs. Vanguard Total International |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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