Correlation Between Amarin PLC and Biogen

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

By analyzing existing cross correlation between Amarin PLC and Biogen Inc, you can compare the effects of market volatilities on Amarin PLC and Biogen 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 Amarin PLC with a short position of Biogen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amarin PLC and Biogen.

Diversification Opportunities for Amarin PLC and Biogen

0.58

Correlation Coefficient

Amarin PLC  Biogen

Very weak diversification

The 3 months correlation between Amarin and Biogen is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Amarin PLC and Biogen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biogen Inc and Amarin PLC 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 Amarin PLC are associated (or correlated) with Biogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biogen Inc has no effect on the direction of Amarin PLC i.e., Amarin PLC and Biogen go up and down completely randomly.

Pair Corralation between Amarin PLC and Biogen

Given the investment horizon of 90 days Amarin PLC is expected to generate 3.56 times more return on investment than Biogen. However, Amarin PLC is 3.56 times more volatile than Biogen Inc. It trades about 0.38 of its potential returns per unit of risk. Biogen Inc is currently generating about -0.11 per unit of risk. If you would invest  45.00  in Amarin PLC on October 26, 2024 and sell it today you would earn a total of  19.00  from holding Amarin PLC or generate 42.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Amarin PLC  vs.  Biogen Inc

Amarin PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Amarin PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Amarin PLC is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Biogen Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biogen Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Amarin PLC and Biogen

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

The idea behind Amarin PLC and Biogen Inc 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.