Correlation Between Pfizer and Amgen
Can any of the company-specific risk be diversified away by investing in both Pfizer 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 Pfizer and Amgen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pfizer Inc and Amgen Inc, you can compare the effects of market volatilities on Pfizer 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 Pfizer with a short position of Amgen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pfizer and Amgen.
Diversification Opportunities for Pfizer and Amgen
Poor diversification
The 3 months correlation between Pfizer and Amgen is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen Inc and Pfizer 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 Pfizer 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 Pfizer i.e., Pfizer and Amgen go up and down completely randomly.
Pair Corralation between Pfizer and Amgen
Assuming the 90 days trading horizon Pfizer Inc is expected to under-perform the Amgen. But the stock apears to be less risky and, when comparing its historical volatility, Pfizer Inc is 1.11 times less risky than Amgen. The stock trades about -0.07 of its potential returns per unit of risk. The Amgen Inc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 24,933 in Amgen Inc on August 30, 2024 and sell it today you would earn a total of 1,607 from holding Amgen Inc or generate 6.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pfizer Inc vs. Amgen Inc
Performance |
| Timeline |
| Pfizer Inc |
| Amgen Inc |
Pfizer and Amgen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pfizer and Amgen
The main advantage of trading using opposite Pfizer and Amgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer 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.| Pfizer vs. CODERE ONLINE LUX | Pfizer vs. MTI WIRELESS EDGE | Pfizer vs. Carsales | Pfizer vs. BRIT AMER TOBACCO |
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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