Correlation Between Amgen and Cars

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

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

Diversification Opportunities for Amgen and Cars

-0.65

Correlation Coefficient

Amgen  Cars

Excellent diversification

The 3 months correlation between Amgen and Cars is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc 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 Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of Amgen i.e., Amgen and Cars go up and down completely randomly.

Pair Corralation between Amgen and Cars

Assuming the 90 days trading horizon Amgen Inc is expected to generate 0.57 times more return on investment than Cars. However, Amgen Inc is 1.74 times less risky than Cars. It trades about 0.04 of its potential returns per unit of risk. Cars Inc is currently generating about 0.02 per unit of risk. If you would invest  20,813  in Amgen Inc on October 23, 2024 and sell it today you would earn a total of  5,407  from holding Amgen Inc or generate 25.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Amgen Inc  vs.  Cars Inc

Amgen Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amgen Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Cars Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cars Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cars reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amgen and Cars

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

The idea behind Amgen Inc and Cars 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.

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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.