Correlation Between AstraZeneca PLC and Sleep Cycle

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

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

Diversification Opportunities for AstraZeneca PLC and Sleep Cycle

0.7

Correlation Coefficient

AstraZeneca PLC  Sleep Cycle

Poor diversification

The 3 months correlation between AstraZeneca and Sleep is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding AstraZeneca PLC and Sleep Cycle AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sleep Cycle AB 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 Sleep Cycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sleep Cycle AB has no effect on the direction of AstraZeneca PLC i.e., AstraZeneca PLC and Sleep Cycle go up and down completely randomly.

Pair Corralation between AstraZeneca PLC and Sleep Cycle

Assuming the 90 days trading horizon AstraZeneca PLC is expected to generate 0.84 times more return on investment than Sleep Cycle. However, AstraZeneca PLC is 1.19 times less risky than Sleep Cycle. It trades about -0.07 of its potential returns per unit of risk. Sleep Cycle AB is currently generating about -0.15 per unit of risk. If you would invest  157,150  in AstraZeneca PLC on September 30, 2024 and sell it today you would lose (11,250) from holding AstraZeneca PLC or give up 7.16% of portfolio value over 90 days.

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

AstraZeneca PLC  vs.  Sleep Cycle AB

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 weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Sleep Cycle AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sleep Cycle AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with AstraZeneca PLC and Sleep Cycle

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

The idea behind AstraZeneca PLC and Sleep Cycle AB 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.