Correlation Between Amgen and CSPC PHARMACEUTGR

Can any of the company-specific risk be diversified away by investing in both Amgen and CSPC PHARMACEUTGR 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 CSPC PHARMACEUTGR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Amgen Inc and CSPC PHARMACEUTGR ADR4, you can compare the effects of market volatilities on Amgen and CSPC PHARMACEUTGR 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 CSPC PHARMACEUTGR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amgen and CSPC PHARMACEUTGR.

Diversification Opportunities for Amgen and CSPC PHARMACEUTGR

0.35

Correlation Coefficient

Amgen  CSPC PHARMACEUTGR

Weak diversification

The 3 months correlation between Amgen and CSPC is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and CSPC PHARMACEUTGR ADR4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSPC PHARMACEUTGR ADR4 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 CSPC PHARMACEUTGR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSPC PHARMACEUTGR ADR4 has no effect on the direction of Amgen i.e., Amgen and CSPC PHARMACEUTGR go up and down completely randomly.

Pair Corralation between Amgen and CSPC PHARMACEUTGR

Assuming the 90 days horizon Amgen Inc is expected to generate 0.46 times more return on investment than CSPC PHARMACEUTGR. However, Amgen Inc is 2.17 times less risky than CSPC PHARMACEUTGR. It trades about 0.16 of its potential returns per unit of risk. CSPC PHARMACEUTGR ADR4 is currently generating about -0.02 per unit of risk. If you would invest  24,785  in Amgen Inc on December 28, 2024 and sell it today you would earn a total of  3,510  from holding Amgen Inc or generate 14.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Amgen Inc  vs.  CSPC PHARMACEUTGR ADR4

Amgen Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amgen Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Amgen reported solid returns over the last few months and may actually be approaching a breakup point.

CSPC PHARMACEUTGR ADR4

Risk-Adjusted Performance

Very Weak

Over the last 90 days CSPC PHARMACEUTGR ADR4 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, CSPC PHARMACEUTGR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Amgen and CSPC PHARMACEUTGR

The main advantage of trading using opposite Amgen and CSPC PHARMACEUTGR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amgen position performs unexpectedly, CSPC PHARMACEUTGR 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 CSPC PHARMACEUTGR will offset losses from the drop in CSPC PHARMACEUTGR's long position.

The idea behind Amgen Inc and CSPC PHARMACEUTGR ADR4 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.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.