Correlation Between Amgen and GlaxoSmithKline PLC
Can any of the company-specific risk be diversified away by investing in both Amgen and GlaxoSmithKline 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 GlaxoSmithKline 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 GlaxoSmithKline PLC ADR, you can compare the effects of market volatilities on Amgen and GlaxoSmithKline 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 GlaxoSmithKline PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amgen and GlaxoSmithKline PLC.
Diversification Opportunities for Amgen and GlaxoSmithKline PLC
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Amgen and GlaxoSmithKline is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and GlaxoSmithKline PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GlaxoSmithKline PLC ADR 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 GlaxoSmithKline PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GlaxoSmithKline PLC ADR has no effect on the direction of Amgen i.e., Amgen and GlaxoSmithKline PLC go up and down completely randomly.
Pair Corralation between Amgen and GlaxoSmithKline PLC
Given the investment horizon of 90 days Amgen Inc is expected to generate 1.16 times more return on investment than GlaxoSmithKline PLC. However, Amgen is 1.16 times more volatile than GlaxoSmithKline PLC ADR. It trades about 0.07 of its potential returns per unit of risk. GlaxoSmithKline PLC ADR is currently generating about 0.02 per unit of risk. If you would invest 21,197 in Amgen Inc on August 27, 2024 and sell it today you would earn a total of 8,256 from holding Amgen Inc or generate 38.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amgen Inc vs. GlaxoSmithKline PLC ADR
Performance |
| Timeline |
| Amgen Inc |
| GlaxoSmithKline PLC ADR |
Amgen and GlaxoSmithKline PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amgen and GlaxoSmithKline PLC
The main advantage of trading using opposite Amgen and GlaxoSmithKline PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amgen position performs unexpectedly, GlaxoSmithKline 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 GlaxoSmithKline PLC will offset losses from the drop in GlaxoSmithKline PLC's long position.| Amgen vs. Eliem Therapeutics | Amgen vs. HCW Biologics | Amgen vs. Scpharmaceuticals | Amgen vs. Milestone Pharmaceuticals |
| GlaxoSmithKline PLC vs. Novartis AG ADR | GlaxoSmithKline PLC vs. AstraZeneca PLC ADR | GlaxoSmithKline PLC vs. Roche Holding Ltd | GlaxoSmithKline PLC vs. Bristol Myers Squibb |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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