Correlation Between Amgen and Cars
Can any of the company-specific risk be diversified away by investing in both Amgen and Cars 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 Amgen and Cars into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amgen Inc and Cars Inc, you can compare the effects of market volatilities on Amgen and Cars 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 Amgen with a short position of Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amgen and Cars.
Diversification Opportunities for Amgen and Cars
Excellent diversification
The 3 months correlation between Amgen and Cars is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc and Amgen 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 Amgen Inc are associated (or correlated) with Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of Amgen i.e., Amgen and Cars go up and down completely randomly.
Pair Corralation between Amgen and Cars
Assuming the 90 days trading horizon Amgen Inc is expected to generate 0.72 times more return on investment than Cars. However, Amgen Inc is 1.4 times less risky than Cars. It trades about -0.22 of its potential returns per unit of risk. Cars Inc is currently generating about -0.3 per unit of risk. If you would invest 26,140 in Amgen Inc on October 9, 2024 and sell it today you would lose (1,080) from holding Amgen Inc or give up 4.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amgen Inc vs. Cars Inc
Performance |
| Timeline |
| Amgen Inc |
| Cars Inc |
Amgen and Cars Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amgen and Cars
The main advantage of trading using opposite Amgen and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amgen position performs unexpectedly, Cars 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 Cars will offset losses from the drop in Cars' long position.| Amgen vs. GLOBUS MEDICAL A | Amgen vs. AVITA Medical | Amgen vs. Sinopec Shanghai Petrochemical | Amgen vs. Sanyo Chemical Industries |
| Cars vs. Penske Automotive Group | Cars vs. Superior Plus Corp | Cars vs. NMI Holdings | Cars vs. SIVERS SEMICONDUCTORS AB |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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