Correlation Between Dermata Therapeutics and AstraZeneca PLC

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

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

Diversification Opportunities for Dermata Therapeutics and AstraZeneca PLC

-0.79

Correlation Coefficient

Dermata Therapeutics  AstraZeneca PLC

Pay attention - limited upside

The 3 months correlation between Dermata and AstraZeneca is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Dermata Therapeutics and AstraZeneca PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC ADR and Dermata Therapeutics 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 Dermata Therapeutics 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 ADR has no effect on the direction of Dermata Therapeutics i.e., Dermata Therapeutics and AstraZeneca PLC go up and down completely randomly.

Pair Corralation between Dermata Therapeutics and AstraZeneca PLC

Given the investment horizon of 90 days Dermata Therapeutics is expected to under-perform the AstraZeneca PLC. In addition to that, Dermata Therapeutics is 8.46 times more volatile than AstraZeneca PLC ADR. It trades about -0.26 of its total potential returns per unit of risk. AstraZeneca PLC ADR is currently generating about 0.24 per unit of volatility. If you would invest  7,548  in AstraZeneca PLC ADR on February 27, 2024 and sell it today you would earn a total of  306.00  from holding AstraZeneca PLC ADR or generate 4.05% return on investment over 90 days.

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

Dermata Therapeutics  vs.  AstraZeneca PLC ADR

Dermata Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dermata Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

AstraZeneca PLC ADR

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AstraZeneca PLC ADR are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, AstraZeneca PLC displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dermata Therapeutics and AstraZeneca PLC

The main advantage of trading using opposite Dermata Therapeutics and AstraZeneca PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dermata Therapeutics 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 Dermata Therapeutics and AstraZeneca PLC ADR 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.