Correlation Between Applied Materials and Amgen
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Amgen 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 Applied Materials and Amgen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Amgen Inc, you can compare the effects of market volatilities on Applied Materials and Amgen 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 Applied Materials with a short position of Amgen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Amgen.
Diversification Opportunities for Applied Materials and Amgen
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Applied and Amgen is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen Inc and Applied Materials 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 Applied Materials are associated (or correlated) with Amgen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amgen Inc has no effect on the direction of Applied Materials i.e., Applied Materials and Amgen go up and down completely randomly.
Pair Corralation between Applied Materials and Amgen
Assuming the 90 days trading horizon Applied Materials is expected to generate 1.53 times more return on investment than Amgen. However, Applied Materials is 1.53 times more volatile than Amgen Inc. It trades about 0.06 of its potential returns per unit of risk. Amgen Inc is currently generating about 0.05 per unit of risk. If you would invest 208,901 in Applied Materials on November 2, 2024 and sell it today you would earn a total of 163,599 from holding Applied Materials or generate 78.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. Amgen Inc
Performance |
| Timeline |
| Applied Materials |
| Amgen Inc |
Applied Materials and Amgen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Amgen
The main advantage of trading using opposite Applied Materials and Amgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Amgen 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 Amgen will offset losses from the drop in Amgen's long position.| Applied Materials vs. Delta Air Lines | Applied Materials vs. GMxico Transportes SAB | Applied Materials vs. First Republic Bank | Applied Materials vs. The Home Depot |
| Amgen vs. New Oriental Education | Amgen vs. Grupo Carso SAB | Amgen vs. GMxico Transportes SAB | Amgen vs. Monster Beverage Corp |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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