Correlation Between Cars and Amgen
Can any of the company-specific risk be diversified away by investing in both Cars and Amgen 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 Cars and Amgen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and Amgen Inc, you can compare the effects of market volatilities on Cars and Amgen 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 Cars with a short position of Amgen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and Amgen.
Diversification Opportunities for Cars and Amgen
Very good diversification
The 3 months correlation between Cars and Amgen is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen Inc and Cars 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 Cars Inc are associated (or correlated) with Amgen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amgen Inc has no effect on the direction of Cars i.e., Cars and Amgen go up and down completely randomly.
Pair Corralation between Cars and Amgen
Given the investment horizon of 90 days Cars is expected to generate 1.33 times less return on investment than Amgen. In addition to that, Cars is 1.57 times more volatile than Amgen Inc. It trades about 0.02 of its total potential returns per unit of risk. Amgen Inc is currently generating about 0.04 per unit of volatility. If you would invest 22,877 in Amgen Inc on August 27, 2024 and sell it today you would earn a total of 6,523 from holding Amgen Inc or generate 28.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cars Inc vs. Amgen Inc
Performance |
| Timeline |
| Cars Inc |
| Amgen Inc |
Cars and Amgen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cars and Amgen
The main advantage of trading using opposite Cars and Amgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars position performs unexpectedly, Amgen 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 Amgen will offset losses from the drop in Amgen's long position.The idea behind Cars Inc and Amgen Inc 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.| 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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