Correlation Between Amarin PLC and AstraZeneca PLC

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

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

Diversification Opportunities for Amarin PLC and AstraZeneca PLC

0.51

Correlation Coefficient

Amarin PLC  AstraZeneca PLC

Very weak diversification

The 3 months correlation between Amarin and AstraZeneca is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Amarin PLC 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 Amarin 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 Amarin PLC 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 Amarin PLC i.e., Amarin PLC and AstraZeneca PLC go up and down completely randomly.

Pair Corralation between Amarin PLC and AstraZeneca PLC

Given the investment horizon of 90 days Amarin PLC is expected to generate 2.72 times more return on investment than AstraZeneca PLC. However, Amarin PLC is 2.72 times more volatile than AstraZeneca PLC ADR. It trades about 0.02 of its potential returns per unit of risk. AstraZeneca PLC ADR is currently generating about -0.09 per unit of risk. If you would invest  63.00  in Amarin PLC on October 27, 2024 and sell it today you would earn a total of  0.00  from holding Amarin PLC or generate 0.0% return on investment over 90 days.

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

Amarin PLC  vs.  AstraZeneca PLC ADR

Amarin PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Amarin PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Amarin PLC is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

AstraZeneca PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AstraZeneca PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Amarin PLC and AstraZeneca PLC

The main advantage of trading using opposite Amarin PLC and AstraZeneca PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amarin PLC 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 Amarin PLC and AstraZeneca PLC ADR 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.