Correlation Between Amazon and Amgen

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

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

Diversification Opportunities for Amazon and Amgen

-0.85

Correlation Coefficient

Amazon  Amgen

Pay attention - limited upside

The 3 months correlation between Amazon and Amgen is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen Inc and Amazon 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 Amazon Inc are associated (or correlated) with Amgen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amgen Inc has no effect on the direction of Amazon i.e., Amazon and Amgen go up and down completely randomly.

Pair Corralation between Amazon and Amgen

Assuming the 90 days trading horizon Amazon is expected to generate 3.15 times less return on investment than Amgen. In addition to that, Amazon is 1.34 times more volatile than Amgen Inc. It trades about 0.04 of its total potential returns per unit of risk. Amgen Inc is currently generating about 0.16 per unit of volatility. If you would invest  25,235  in Amgen Inc on October 23, 2024 and sell it today you would earn a total of  735.00  from holding Amgen Inc or generate 2.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	94.12%
Values	Daily Returns

Amazon Inc  vs.  Amgen Inc

Amazon Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

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 fragile performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Amazon and Amgen

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

The idea behind Amazon Inc and Amgen 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.