Correlation Between DermTech and AstraZeneca PLC

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

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

Diversification Opportunities for DermTech and AstraZeneca PLC

-0.68

Correlation Coefficient

DermTech  AstraZeneca PLC

Excellent diversification

The 3 months correlation between DermTech and AstraZeneca is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding DermTech 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 DermTech 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 DermTech 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 DermTech i.e., DermTech and AstraZeneca PLC go up and down completely randomly.

Pair Corralation between DermTech and AstraZeneca PLC

Given the investment horizon of 90 days DermTech is expected to under-perform the AstraZeneca PLC. In addition to that, DermTech is 4.9 times more volatile than AstraZeneca PLC ADR. It trades about -0.03 of its total potential returns per unit of risk. AstraZeneca PLC ADR is currently generating about 0.04 per unit of volatility. If you would invest  5,885  in AstraZeneca PLC ADR on February 1, 2024 and sell it today you would earn a total of  1,703  from holding AstraZeneca PLC ADR or generate 28.94% return on investment over 90 days.

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

DermTech  vs.  AstraZeneca PLC ADR

DermTech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DermTech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

AstraZeneca PLC ADR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AstraZeneca PLC ADR are ranked lower than 13 (%) 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 DermTech and AstraZeneca PLC

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

Check out your portfolio center.

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 CEOs Directory module to screen CEOs from public companies around the world.