Can any of the company-specific risk be diversified away by investing in both AstraZeneca PLC and Biomerica 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 Biomerica 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 Biomerica, you can compare the effects of market volatilities on AstraZeneca PLC and Biomerica 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 Biomerica. Check out your portfolio center. Please also check ongoing floating volatility patterns of AstraZeneca PLC and Biomerica.
Diversification Opportunities for AstraZeneca PLC and Biomerica
The 3 months correlation between AstraZeneca and Biomerica is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding AstraZeneca PLC ADR and Biomerica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biomerica 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 Biomerica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biomerica has no effect on the direction of AstraZeneca PLC i.e., AstraZeneca PLC and Biomerica go up and down completely randomly.
Pair Corralation between AstraZeneca PLC and Biomerica
Considering the 90-day investment horizon AstraZeneca PLC ADR is expected to generate 0.28 times more return on investment than Biomerica. However, AstraZeneca PLC ADR is 3.59 times less risky than Biomerica. It trades about 0.2 of its potential returns per unit of risk. Biomerica is currently generating about -0.04 per unit of risk. If you would invest 7,576 in AstraZeneca PLC ADR on March 6, 2024 and sell it today you would earn a total of 323.00 from holding AstraZeneca PLC ADR or generate 4.26% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in AstraZeneca PLC ADR are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, AstraZeneca PLC displayed solid returns over the last few months and may actually be approaching a breakup point.
Over the last 90 days Biomerica has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.