Correlation Between Amgen and Scilex Holding

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

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

Diversification Opportunities for Amgen and Scilex Holding

0.37

Correlation Coefficient

Amgen  Scilex Holding

Weak diversification

The 3 months correlation between Amgen and Scilex is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and Scilex Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scilex Holding 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 Scilex Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scilex Holding has no effect on the direction of Amgen i.e., Amgen and Scilex Holding go up and down completely randomly.

Pair Corralation between Amgen and Scilex Holding

Given the investment horizon of 90 days Amgen Inc is expected to generate 0.08 times more return on investment than Scilex Holding. However, Amgen Inc is 13.06 times less risky than Scilex Holding. It trades about 0.17 of its potential returns per unit of risk. Scilex Holding is currently generating about -0.13 per unit of risk. If you would invest  26,449  in Amgen Inc on October 25, 2024 and sell it today you would earn a total of  895.00  from holding Amgen Inc or generate 3.38% return on investment over 90 days.

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

Amgen Inc  vs.  Scilex Holding

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 latest conflicting performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Scilex Holding

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Scilex Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Scilex Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amgen and Scilex Holding

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

The idea behind Amgen Inc and Scilex Holding 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.