Correlation Between Amgen and Adient PLC
Can any of the company-specific risk be diversified away by investing in both Amgen and Adient 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 Adient 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 Adient PLC, you can compare the effects of market volatilities on Amgen and Adient 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 Adient PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amgen and Adient PLC.
Diversification Opportunities for Amgen and Adient PLC
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Amgen and Adient is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and Adient PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adient 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 Adient PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adient PLC has no effect on the direction of Amgen i.e., Amgen and Adient PLC go up and down completely randomly.
Pair Corralation between Amgen and Adient PLC
Given the investment horizon of 90 days Amgen Inc is expected to generate 0.9 times more return on investment than Adient PLC. However, Amgen Inc is 1.12 times less risky than Adient PLC. It trades about -0.14 of its potential returns per unit of risk. Adient PLC is currently generating about -0.14 per unit of risk. If you would invest 31,465 in Amgen Inc on August 27, 2024 and sell it today you would lose (2,065) from holding Amgen Inc or give up 6.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amgen Inc vs. Adient PLC
Performance |
| Timeline |
| Amgen Inc |
| Adient PLC |
Amgen and Adient PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amgen and Adient PLC
The main advantage of trading using opposite Amgen and Adient PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amgen position performs unexpectedly, Adient 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 Adient PLC will offset losses from the drop in Adient PLC's long position.| Amgen vs. Eliem Therapeutics | Amgen vs. HCW Biologics | Amgen vs. Scpharmaceuticals | Amgen vs. Milestone Pharmaceuticals |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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