Correlation Between Amgen and Capital One

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

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

Diversification Opportunities for Amgen and Capital One

-0.27

Correlation Coefficient

Amgen  Capital One

Very good diversification

The 3 months correlation between Amgen and Capital is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One Financial 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 Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of Amgen i.e., Amgen and Capital One go up and down completely randomly.

Pair Corralation between Amgen and Capital One

Assuming the 90 days trading horizon Amgen Inc is expected to generate 0.73 times more return on investment than Capital One. However, Amgen Inc is 1.37 times less risky than Capital One. It trades about 0.19 of its potential returns per unit of risk. Capital One Financial is currently generating about -0.02 per unit of risk. If you would invest  528,827  in Amgen Inc on December 30, 2024 and sell it today you would earn a total of  114,173  from holding Amgen Inc or generate 21.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Amgen Inc  vs.  Capital One Financial

Amgen Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amgen Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Amgen showed solid returns over the last few months and may actually be approaching a breakup point.

Capital One Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capital One Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Capital One is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Amgen and Capital One

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

The idea behind Amgen Inc and Capital One Financial 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.