Correlation Between Catalent and Amgen

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

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

Diversification Opportunities for Catalent and Amgen

-0.55

Correlation Coefficient

Catalent  Amgen

Excellent diversification

The 3 months correlation between Catalent and Amgen is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen Inc and Catalent 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 Catalent 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 Catalent i.e., Catalent and Amgen go up and down completely randomly.

Pair Corralation between Catalent and Amgen

Given the investment horizon of 90 days Catalent is expected to generate 0.37 times more return on investment than Amgen. However, Catalent is 2.71 times less risky than Amgen. It trades about 0.17 of its potential returns per unit of risk. Amgen Inc is currently generating about -0.06 per unit of risk. If you would invest  5,650  in Catalent on September 19, 2024 and sell it today you would earn a total of  698.00  from holding Catalent or generate 12.35% return on investment over 90 days.

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

Catalent  vs.  Amgen Inc

Catalent

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Catalent is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Catalent and Amgen

The main advantage of trading using opposite Catalent and Amgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catalent 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 Catalent 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.