Correlation Between Amgen and Old Market

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

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

Diversification Opportunities for Amgen and Old Market

0.07

Correlation Coefficient

Amgen  Old Market

Significant diversification

The 3 months correlation between Amgen and Old is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and Old Market Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Market Capital 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 Old Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Market Capital has no effect on the direction of Amgen i.e., Amgen and Old Market go up and down completely randomly.

Pair Corralation between Amgen and Old Market

Given the investment horizon of 90 days Amgen Inc is expected to generate 0.7 times more return on investment than Old Market. However, Amgen Inc is 1.43 times less risky than Old Market. It trades about 0.18 of its potential returns per unit of risk. Old Market Capital is currently generating about 0.04 per unit of risk. If you would invest  26,107  in Amgen Inc on December 26, 2024 and sell it today you would earn a total of  4,464  from holding Amgen Inc or generate 17.1% return on investment over 90 days.

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

Amgen Inc  vs.  Old Market Capital

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 unfluctuating technical and fundamental indicators, Amgen displayed solid returns over the last few months and may actually be approaching a breakup point.

Old Market Capital

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Old Market Capital are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Old Market is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Amgen and Old Market

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

The idea behind Amgen Inc and Old Market Capital 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.