Correlation Between Amgen and VTv Therapeutics

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

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

Diversification Opportunities for Amgen and VTv Therapeutics

0.62

Correlation Coefficient

Amgen  VTv Therapeutics

Poor diversification

The 3 months correlation between Amgen and VTv is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and vTv Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on vTv Therapeutics 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 VTv Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of vTv Therapeutics has no effect on the direction of Amgen i.e., Amgen and VTv Therapeutics go up and down completely randomly.

Pair Corralation between Amgen and VTv Therapeutics

Given the investment horizon of 90 days Amgen is expected to generate 2.67 times less return on investment than VTv Therapeutics. But when comparing it to its historical volatility, Amgen Inc is 5.6 times less risky than VTv Therapeutics. It trades about 0.18 of its potential returns per unit of risk. vTv Therapeutics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,320  in vTv Therapeutics on December 27, 2024 and sell it today you would earn a total of  401.00  from holding vTv Therapeutics or generate 30.38% return on investment over 90 days.

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

Amgen Inc  vs.  vTv Therapeutics

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.

vTv Therapeutics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in vTv Therapeutics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, VTv Therapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amgen and VTv Therapeutics

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

The idea behind Amgen Inc and vTv Therapeutics 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.