Correlation Between Amgen and Perrigo Company

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

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

Diversification Opportunities for Amgen and Perrigo Company

-0.52

Correlation Coefficient

Amgen  Perrigo Company

Excellent diversification

The 3 months correlation between Amgen and Perrigo is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and Perrigo Company PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perrigo Company 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 Perrigo Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perrigo Company has no effect on the direction of Amgen i.e., Amgen and Perrigo Company go up and down completely randomly.

Pair Corralation between Amgen and Perrigo Company

Given the investment horizon of 90 days Amgen Inc is expected to under-perform the Perrigo Company. But the stock apears to be less risky and, when comparing its historical volatility, Amgen Inc is 1.1 times less risky than Perrigo Company. The stock trades about -0.15 of its potential returns per unit of risk. The Perrigo Company PLC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,688  in Perrigo Company PLC on September 12, 2024 and sell it today you would earn a total of  71.00  from holding Perrigo Company PLC or generate 2.64% return on investment over 90 days.

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

Amgen Inc  vs.  Perrigo Company PLC

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 weak 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.

Perrigo Company

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Perrigo Company PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Perrigo Company is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Amgen and Perrigo Company

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

The idea behind Amgen Inc and Perrigo Company PLC 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.