Correlation Between Roche Holding and AstraZeneca PLC

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

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

Diversification Opportunities for Roche Holding and AstraZeneca PLC

-0.2

Correlation Coefficient

Roche Holding  AstraZeneca PLC

Good diversification

The 3 months correlation between Roche and AstraZeneca is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Roche Holding AG and AstraZeneca PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC and Roche Holding 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 Roche Holding AG 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 Roche Holding i.e., Roche Holding and AstraZeneca PLC go up and down completely randomly.

Pair Corralation between Roche Holding and AstraZeneca PLC

Assuming the 90 days horizon Roche Holding AG is expected to under-perform the AstraZeneca PLC. But the otc stock apears to be less risky and, when comparing its historical volatility, Roche Holding AG is 2.0 times less risky than AstraZeneca PLC. The otc stock trades about -0.14 of its potential returns per unit of risk. The AstraZeneca PLC is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  13,580  in AstraZeneca PLC on January 30, 2024 and sell it today you would earn a total of  930.00  from holding AstraZeneca PLC or generate 6.85% return on investment over 90 days.

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

Roche Holding AG  vs.  AstraZeneca PLC

Roche Holding AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roche Holding AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

AstraZeneca PLC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AstraZeneca PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental indicators, AstraZeneca PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Roche Holding and AstraZeneca PLC

The main advantage of trading using opposite Roche Holding and AstraZeneca PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roche Holding 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 Roche Holding AG 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.