Correlation Between Embecta Corp and AstraZeneca PLC

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

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

Diversification Opportunities for Embecta Corp and AstraZeneca PLC

-0.71

Correlation Coefficient

Embecta Corp  AstraZeneca PLC

Pay attention - limited upside

The 3 months correlation between Embecta and AstraZeneca is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Embecta Corp 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 Embecta Corp 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 Embecta Corp 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 Embecta Corp i.e., Embecta Corp and AstraZeneca PLC go up and down completely randomly.

Pair Corralation between Embecta Corp and AstraZeneca PLC

Given the investment horizon of 90 days Embecta Corp is expected to under-perform the AstraZeneca PLC. In addition to that, Embecta Corp is 2.01 times more volatile than AstraZeneca PLC ADR. It trades about -0.39 of its total potential returns per unit of risk. AstraZeneca PLC ADR is currently generating about 0.42 per unit of volatility. If you would invest  6,725  in AstraZeneca PLC ADR on January 31, 2024 and sell it today you would earn a total of  863.00  from holding AstraZeneca PLC ADR or generate 12.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Embecta Corp  vs.  AstraZeneca PLC ADR

Embecta Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Embecta Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

AstraZeneca PLC ADR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AstraZeneca PLC ADR are ranked lower than 12 (%) 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 Embecta Corp and AstraZeneca PLC

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