Correlation Between Amgen and Waters

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

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

Diversification Opportunities for Amgen and Waters

-0.45

Correlation Coefficient

Amgen  Waters

Very good diversification

The 3 months correlation between Amgen and Waters is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and Waters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waters 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 Waters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waters has no effect on the direction of Amgen i.e., Amgen and Waters go up and down completely randomly.

Pair Corralation between Amgen and Waters

Given the investment horizon of 90 days Amgen is expected to generate 2.91 times less return on investment than Waters. But when comparing it to its historical volatility, Amgen Inc is 1.47 times less risky than Waters. It trades about 0.17 of its potential returns per unit of risk. Waters is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  36,976  in Waters on October 23, 2024 and sell it today you would earn a total of  3,424  from holding Waters or generate 9.26% 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.  Waters

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 conflicting performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Waters

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Waters are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Waters unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amgen and Waters

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

The idea behind Amgen Inc and Waters 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.