Correlation Between Amgen and AstraZeneca PLC
Can any of the company-specific risk be diversified away by investing in both Amgen 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 Amgen and AstraZeneca PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amgen Inc and AstraZeneca PLC, you can compare the effects of market volatilities on Amgen 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 Amgen with a short position of AstraZeneca PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amgen and AstraZeneca PLC.
Diversification Opportunities for Amgen and AstraZeneca PLC
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Amgen and AstraZeneca is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and AstraZeneca PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC 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 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 has no effect on the direction of Amgen i.e., Amgen and AstraZeneca PLC go up and down completely randomly.
Pair Corralation between Amgen and AstraZeneca PLC
Assuming the 90 days trading horizon Amgen Inc is expected to generate 1.07 times more return on investment than AstraZeneca PLC. However, Amgen is 1.07 times more volatile than AstraZeneca PLC. It trades about 0.02 of its potential returns per unit of risk. AstraZeneca PLC is currently generating about 0.01 per unit of risk. If you would invest 25,335 in Amgen Inc on August 26, 2024 and sell it today you would earn a total of 2,855 from holding Amgen Inc or generate 11.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amgen Inc vs. AstraZeneca PLC
Performance |
| Timeline |
| Amgen Inc |
| AstraZeneca PLC |
Amgen and AstraZeneca PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amgen and AstraZeneca PLC
The main advantage of trading using opposite Amgen and AstraZeneca PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amgen 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 Amgen Inc and AstraZeneca PLC 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.| AstraZeneca PLC vs. Johnson Johnson | AstraZeneca PLC vs. Pfizer Inc | AstraZeneca PLC vs. Amgen Inc | AstraZeneca PLC vs. Bayer AG NA |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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