Correlation Between Amgen and Mach Natural

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

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

Diversification Opportunities for Amgen and Mach Natural

-0.68

Correlation Coefficient

Amgen  Mach Natural

Excellent diversification

The 3 months correlation between Amgen and Mach is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and Mach Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mach Natural Resources 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 Mach Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mach Natural Resources has no effect on the direction of Amgen i.e., Amgen and Mach Natural go up and down completely randomly.

Pair Corralation between Amgen and Mach Natural

Given the investment horizon of 90 days Amgen Inc is expected to generate 0.87 times more return on investment than Mach Natural. However, Amgen Inc is 1.15 times less risky than Mach Natural. It trades about 0.18 of its potential returns per unit of risk. Mach Natural Resources is currently generating about -0.02 per unit of risk. If you would invest  26,055  in Amgen Inc on December 27, 2024 and sell it today you would earn a total of  4,514  from holding Amgen Inc or generate 17.32% return on investment over 90 days.

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

Amgen Inc  vs.  Mach Natural Resources

Amgen Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amgen Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Amgen displayed solid returns over the last few months and may actually be approaching a breakup point.

Mach Natural Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mach Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Mach Natural is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Amgen and Mach Natural

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

The idea behind Amgen Inc and Mach Natural Resources 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.