Correlation Between Amgen and Arrow Electronics
Can any of the company-specific risk be diversified away by investing in both Amgen and Arrow Electronics 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 Arrow Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amgen Inc and Arrow Electronics, you can compare the effects of market volatilities on Amgen and Arrow Electronics 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 Arrow Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amgen and Arrow Electronics.
Diversification Opportunities for Amgen and Arrow Electronics
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amgen and Arrow is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics 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 Arrow Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Electronics has no effect on the direction of Amgen i.e., Amgen and Arrow Electronics go up and down completely randomly.
Pair Corralation between Amgen and Arrow Electronics
Given the investment horizon of 90 days Amgen Inc is expected to generate 0.79 times more return on investment than Arrow Electronics. However, Amgen Inc is 1.26 times less risky than Arrow Electronics. It trades about -0.03 of its potential returns per unit of risk. Arrow Electronics is currently generating about -0.03 per unit of risk. If you would invest 30,287 in Amgen Inc on September 1, 2024 and sell it today you would lose (2,000) from holding Amgen Inc or give up 6.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amgen Inc vs. Arrow Electronics
Performance |
| Timeline |
| Amgen Inc |
| Arrow Electronics |
Amgen and Arrow Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amgen and Arrow Electronics
The main advantage of trading using opposite Amgen and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amgen position performs unexpectedly, Arrow Electronics 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 Arrow Electronics will offset losses from the drop in Arrow Electronics' long position.| Amgen vs. Tff Pharmaceuticals | Amgen vs. Eliem Therapeutics | Amgen vs. Inhibrx | Amgen vs. Enliven Therapeutics |
| Arrow Electronics vs. Insight Enterprises | Arrow Electronics vs. Synnex | Arrow Electronics vs. Climb Global Solutions | Arrow Electronics vs. ScanSource |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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