Correlation Between AstraZeneca PLC and Santen Pharmaceutical

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

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

Diversification Opportunities for AstraZeneca PLC and Santen Pharmaceutical

0.39

Correlation Coefficient

AstraZeneca PLC  Santen Pharmaceutical

Weak diversification

The 3 months correlation between AstraZeneca and Santen is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding AstraZeneca PLC ADR and Santen Pharmaceutical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santen Pharmaceutical 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 ADR are associated (or correlated) with Santen Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santen Pharmaceutical has no effect on the direction of AstraZeneca PLC i.e., AstraZeneca PLC and Santen Pharmaceutical go up and down completely randomly.

Pair Corralation between AstraZeneca PLC and Santen Pharmaceutical

Considering the 90-day investment horizon AstraZeneca PLC ADR is expected to under-perform the Santen Pharmaceutical. But the stock apears to be less risky and, when comparing its historical volatility, AstraZeneca PLC ADR is 1.63 times less risky than Santen Pharmaceutical. The stock trades about -0.08 of its potential returns per unit of risk. The Santen Pharmaceutical Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  980.00  in Santen Pharmaceutical Co on September 26, 2024 and sell it today you would earn a total of  73.00  from holding Santen Pharmaceutical Co or generate 7.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.2%
Values	Daily Returns

AstraZeneca PLC ADR  vs.  Santen Pharmaceutical Co

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 uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Santen Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Santen Pharmaceutical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with AstraZeneca PLC and Santen Pharmaceutical

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

The idea behind AstraZeneca PLC ADR and Santen Pharmaceutical Co 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.