Correlation Between Organon and AstraZeneca PLC

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

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

Diversification Opportunities for Organon and AstraZeneca PLC

-0.1

Correlation Coefficient

Organon  AstraZeneca PLC

Good diversification

The 3 months correlation between Organon and AstraZeneca is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Organon Co and AstraZeneca PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC and Organon 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 Organon Co 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 Organon i.e., Organon and AstraZeneca PLC go up and down completely randomly.

Pair Corralation between Organon and AstraZeneca PLC

Considering the 90-day investment horizon Organon is expected to generate 4.82 times less return on investment than AstraZeneca PLC. But when comparing it to its historical volatility, Organon Co is 1.08 times less risky than AstraZeneca PLC. It trades about 0.02 of its potential returns per unit of risk. AstraZeneca PLC is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  13,019  in AstraZeneca PLC on December 29, 2024 and sell it today you would earn a total of  1,728  from holding AstraZeneca PLC or generate 13.27% return on investment over 90 days.

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

Organon Co  vs.  AstraZeneca PLC

Organon

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Organon Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Organon is not utilizing all of its potentials. The new stock price disarray, may contribute to short-term losses for the investors.

AstraZeneca PLC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AstraZeneca PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, AstraZeneca PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Organon and AstraZeneca PLC

The main advantage of trading using opposite Organon and AstraZeneca PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Organon 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 Organon Co 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.