Correlation Between Amgen and Altria
Can any of the company-specific risk be diversified away by investing in both Amgen and Altria 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 Altria into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amgen Inc and Altria Group, you can compare the effects of market volatilities on Amgen and Altria 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 Altria. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amgen and Altria.
Diversification Opportunities for Amgen and Altria
Pay attention - limited upside
The 3 months correlation between Amgen and Altria is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and Altria Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altria Group 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 Altria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altria Group has no effect on the direction of Amgen i.e., Amgen and Altria go up and down completely randomly.
Pair Corralation between Amgen and Altria
Given the investment horizon of 90 days Amgen Inc is expected to under-perform the Altria. In addition to that, Amgen is 3.04 times more volatile than Altria Group. It trades about -0.24 of its total potential returns per unit of risk. Altria Group is currently generating about 0.37 per unit of volatility. If you would invest 5,388 in Altria Group on September 4, 2024 and sell it today you would earn a total of 330.00 from holding Altria Group or generate 6.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amgen Inc vs. Altria Group
Performance |
| Timeline |
| Amgen Inc |
| Altria Group |
Amgen and Altria Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amgen and Altria
The main advantage of trading using opposite Amgen and Altria positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amgen position performs unexpectedly, Altria 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 Altria will offset losses from the drop in Altria's long position.The idea behind Amgen Inc and Altria Group 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.| Altria vs. British American Tobacco | Altria vs. Universal | Altria vs. Imperial Brands PLC | Altria vs. Philip Morris International |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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