Correlation Between Amgen and AES Corp
Can any of the company-specific risk be diversified away by investing in both Amgen and AES Corp 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 AES Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amgen Inc and AES Corp Unit, you can compare the effects of market volatilities on Amgen and AES Corp 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 AES Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amgen and AES Corp.
Diversification Opportunities for Amgen and AES Corp
Good diversification
The 3 months correlation between Amgen and AES is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and AES Corp Unit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES Corp Unit 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 AES Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AES Corp Unit has no effect on the direction of Amgen i.e., Amgen and AES Corp go up and down completely randomly.
Pair Corralation between Amgen and AES Corp
Given the investment horizon of 90 days Amgen Inc is expected to generate 1.07 times more return on investment than AES Corp. However, Amgen is 1.07 times more volatile than AES Corp Unit. It trades about 0.02 of its potential returns per unit of risk. AES Corp Unit is currently generating about -0.05 per unit of risk. If you would invest 26,729 in Amgen Inc on August 24, 2024 and sell it today you would earn a total of 2,724 from holding Amgen Inc or generate 10.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 32.06% |
| Values | Daily Returns |
Amgen Inc vs. AES Corp Unit
Performance |
| Timeline |
| Amgen Inc |
| AES Corp Unit |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Amgen and AES Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amgen and AES Corp
The main advantage of trading using opposite Amgen and AES Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amgen position performs unexpectedly, AES Corp 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 AES Corp will offset losses from the drop in AES Corp's long position.The idea behind Amgen Inc and AES Corp Unit 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.| AES Corp vs. The Cheesecake Factory | AES Corp vs. Dave Busters Entertainment | AES Corp vs. Omni Health | AES Corp vs. Amgen Inc |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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