Correlation Between Amgen and Eton Pharmaceuticals

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

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

Diversification Opportunities for Amgen and Eton Pharmaceuticals

-0.89

Correlation Coefficient

Amgen  Eton Pharmaceuticals

Pay attention - limited upside

The 3 months correlation between Amgen and Eton is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and Eton Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eton Pharmaceuticals 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 Eton Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eton Pharmaceuticals has no effect on the direction of Amgen i.e., Amgen and Eton Pharmaceuticals go up and down completely randomly.

Pair Corralation between Amgen and Eton Pharmaceuticals

Given the investment horizon of 90 days Amgen Inc is expected to under-perform the Eton Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Amgen Inc is 2.6 times less risky than Eton Pharmaceuticals. The stock trades about -0.16 of its potential returns per unit of risk. The Eton Pharmaceuticals is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  515.00  in Eton Pharmaceuticals on September 13, 2024 and sell it today you would earn a total of  701.00  from holding Eton Pharmaceuticals or generate 136.12% return on investment over 90 days.

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

Amgen Inc  vs.  Eton Pharmaceuticals

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 inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Eton Pharmaceuticals

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Eton Pharmaceuticals are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Eton Pharmaceuticals displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amgen and Eton Pharmaceuticals

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

The idea behind Amgen Inc and Eton Pharmaceuticals 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.