Correlation Between Dell Technologies and AstraZeneca PLC

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

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

Diversification Opportunities for Dell Technologies and AstraZeneca PLC

0.77

Correlation Coefficient

Dell Technologies  AstraZeneca PLC

Poor diversification

The 3 months correlation between Dell and AstraZeneca is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Dell Technologies 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 Dell Technologies 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 Dell Technologies 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 Dell Technologies i.e., Dell Technologies and AstraZeneca PLC go up and down completely randomly.

Pair Corralation between Dell Technologies and AstraZeneca PLC

Given the investment horizon of 90 days Dell Technologies is expected to generate 4.21 times more return on investment than AstraZeneca PLC. However, Dell Technologies is 4.21 times more volatile than AstraZeneca PLC ADR. It trades about 0.36 of its potential returns per unit of risk. AstraZeneca PLC ADR is currently generating about 0.26 per unit of risk. If you would invest  12,506  in Dell Technologies on February 26, 2024 and sell it today you would earn a total of  3,512  from holding Dell Technologies or generate 28.08% return on investment over 90 days.

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

Dell Technologies  vs.  AstraZeneca PLC ADR

Dell Technologies

Risk-Adjusted Performance

15 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dell Technologies are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Dell Technologies disclosed solid returns over the last few months and may actually be approaching a breakup point.

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 weak basic indicators, AstraZeneca PLC displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dell Technologies and AstraZeneca PLC

The main advantage of trading using opposite Dell Technologies and AstraZeneca PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dell Technologies 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 Dell Technologies 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.