Correlation Between Astellas Pharma and AstraZeneca PLC

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

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

Diversification Opportunities for Astellas Pharma and AstraZeneca PLC

0.81

Correlation Coefficient

Astellas Pharma  AstraZeneca PLC

Very poor diversification

The 3 months correlation between Astellas and AstraZeneca is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Astellas Pharma and AstraZeneca PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC and Astellas Pharma 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 Astellas Pharma 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 Astellas Pharma i.e., Astellas Pharma and AstraZeneca PLC go up and down completely randomly.

Pair Corralation between Astellas Pharma and AstraZeneca PLC

Assuming the 90 days horizon Astellas Pharma is expected to under-perform the AstraZeneca PLC. But the pink sheet apears to be less risky and, when comparing its historical volatility, Astellas Pharma is 1.7 times less risky than AstraZeneca PLC. The pink sheet trades about -0.2 of its potential returns per unit of risk. The AstraZeneca PLC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  13,024  in AstraZeneca PLC on September 15, 2024 and sell it today you would earn a total of  150.00  from holding AstraZeneca PLC or generate 1.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Astellas Pharma  vs.  AstraZeneca PLC

Astellas Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Astellas Pharma 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 primary indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

AstraZeneca PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AstraZeneca PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Astellas Pharma and AstraZeneca PLC

The main advantage of trading using opposite Astellas Pharma and AstraZeneca PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Astellas Pharma 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.

The idea behind Astellas Pharma 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.