Correlation Between AstraZeneca PLC and Ameriprise Financial

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

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

Diversification Opportunities for AstraZeneca PLC and Ameriprise Financial

-0.58

Correlation Coefficient

AstraZeneca PLC  Ameriprise Financial

Excellent diversification

The 3 months correlation between AstraZeneca and Ameriprise is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding AstraZeneca PLC and Ameriprise Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriprise Financial 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 Ameriprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriprise Financial has no effect on the direction of AstraZeneca PLC i.e., AstraZeneca PLC and Ameriprise Financial go up and down completely randomly.

Pair Corralation between AstraZeneca PLC and Ameriprise Financial

Assuming the 90 days trading horizon AstraZeneca PLC is expected to generate 1.37 times less return on investment than Ameriprise Financial. In addition to that, AstraZeneca PLC is 1.24 times more volatile than Ameriprise Financial. It trades about 0.07 of its total potential returns per unit of risk. Ameriprise Financial is currently generating about 0.13 per unit of volatility. If you would invest  51,025  in Ameriprise Financial on December 4, 2024 and sell it today you would earn a total of  26,782  from holding Ameriprise Financial or generate 52.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.33%
Values	Daily Returns

AstraZeneca PLC  vs.  Ameriprise Financial

AstraZeneca PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AstraZeneca PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AstraZeneca PLC sustained solid returns over the last few months and may actually be approaching a breakup point.

Ameriprise Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ameriprise Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with AstraZeneca PLC and Ameriprise Financial

The main advantage of trading using opposite AstraZeneca PLC and Ameriprise Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AstraZeneca PLC position performs unexpectedly, Ameriprise Financial 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 Ameriprise Financial will offset losses from the drop in Ameriprise Financial's long position.

The idea behind AstraZeneca PLC and Ameriprise Financial 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.