Correlation Between AstraZeneca PLC and Metro Bank

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

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

Diversification Opportunities for AstraZeneca PLC and Metro Bank

-0.77

Correlation Coefficient

AstraZeneca PLC  Metro Bank

Pay attention - limited upside

The 3 months correlation between AstraZeneca and Metro is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding AstraZeneca PLC and Metro Bank PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Bank PLC 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 Metro Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Bank PLC has no effect on the direction of AstraZeneca PLC i.e., AstraZeneca PLC and Metro Bank go up and down completely randomly.

Pair Corralation between AstraZeneca PLC and Metro Bank

Assuming the 90 days trading horizon AstraZeneca PLC is expected to under-perform the Metro Bank. But the stock apears to be less risky and, when comparing its historical volatility, AstraZeneca PLC is 3.61 times less risky than Metro Bank. The stock trades about -0.06 of its potential returns per unit of risk. The Metro Bank PLC is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  9,150  in Metro Bank PLC on October 8, 2024 and sell it today you would earn a total of  500.00  from holding Metro Bank PLC or generate 5.46% return on investment over 90 days.

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

AstraZeneca PLC  vs.  Metro Bank PLC

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. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Metro Bank PLC

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Bank PLC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Metro Bank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AstraZeneca PLC and Metro Bank

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

The idea behind AstraZeneca PLC and Metro Bank 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.

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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.