Correlation Between AstraZeneca PLC and Organon

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

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

Diversification Opportunities for AstraZeneca PLC and Organon

0.88

Correlation Coefficient

AstraZeneca PLC  Organon

Very poor diversification

The 3 months correlation between AstraZeneca and Organon is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding AstraZeneca PLC and Organon Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Organon 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 Organon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Organon has no effect on the direction of AstraZeneca PLC i.e., AstraZeneca PLC and Organon go up and down completely randomly.

Pair Corralation between AstraZeneca PLC and Organon

Assuming the 90 days horizon AstraZeneca PLC is expected to generate 1.16 times more return on investment than Organon. However, AstraZeneca PLC is 1.16 times more volatile than Organon Co. It trades about -0.1 of its potential returns per unit of risk. Organon Co is currently generating about -0.21 per unit of risk. If you would invest  15,700  in AstraZeneca PLC on September 16, 2024 and sell it today you would lose (2,526) from holding AstraZeneca PLC or give up 16.09% of portfolio value over 90 days.

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

AstraZeneca PLC  vs.  Organon Co

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.

Organon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Organon Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of sluggish performance in the last few months, the Stock's technical and fundamental 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.

Pair Trading with AstraZeneca PLC and Organon

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

The idea behind AstraZeneca PLC and Organon 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.