Correlation Between Mitie Group and AstraZeneca PLC

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

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

Diversification Opportunities for Mitie Group and AstraZeneca PLC

0.65

Correlation Coefficient

Mitie Group  AstraZeneca PLC

Poor diversification

The 3 months correlation between Mitie and AstraZeneca is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Mitie Group PLC and AstraZeneca PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC and Mitie Group 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 Mitie Group 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 has no effect on the direction of Mitie Group i.e., Mitie Group and AstraZeneca PLC go up and down completely randomly.

Pair Corralation between Mitie Group and AstraZeneca PLC

Assuming the 90 days horizon Mitie Group PLC is expected to generate 0.89 times more return on investment than AstraZeneca PLC. However, Mitie Group PLC is 1.13 times less risky than AstraZeneca PLC. It trades about 0.11 of its potential returns per unit of risk. AstraZeneca PLC is currently generating about -0.07 per unit of risk. If you would invest  113,600  in Mitie Group PLC on September 23, 2024 and sell it today you would earn a total of  2,450  from holding Mitie Group PLC or generate 2.16% return on investment over 90 days.

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

Mitie Group PLC  vs.  AstraZeneca PLC

Mitie Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitie Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Mitie Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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

Pair Trading with Mitie Group and AstraZeneca PLC

The main advantage of trading using opposite Mitie Group and AstraZeneca PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitie Group 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 Mitie Group PLC and AstraZeneca 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.