Correlation Between Microsoft and Amgen
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Amgen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Amgen Inc, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Amgen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Amgen.
Diversification Opportunities for Microsoft and Amgen
Significant diversification
The 3 months correlation between Microsoft and Amgen is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen Inc and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Amgen go up and down completely randomly.
Pair Corralation between Microsoft and Amgen
Given the investment horizon of 90 days Microsoft is expected to generate 0.49 times more return on investment than Amgen. However, Microsoft is 2.04 times less risky than Amgen. It trades about -0.04 of its potential returns per unit of risk. Amgen Inc is currently generating about -0.1 per unit of risk. If you would invest 43,109 in Microsoft on August 30, 2024 and sell it today you would lose (810.00) from holding Microsoft or give up 1.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Microsoft vs. Amgen Inc
Performance |
| Timeline |
| Microsoft |
| Amgen Inc |
Microsoft and Amgen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Amgen
The main advantage of trading using opposite Microsoft and Amgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Amgen vs. THAI BEVERAGE | Amgen vs. Materialise NV | Amgen vs. VULCAN MATERIALS | Amgen vs. China Resources Beer |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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