Correlation Between Denali Therapeutics and Amgen

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

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

Diversification Opportunities for Denali Therapeutics and Amgen

0.87

Correlation Coefficient

Denali Therapeutics  Amgen

Very poor diversification

The 3 months correlation between Denali and Amgen is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Denali Therapeutics and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen Inc and Denali Therapeutics 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 Denali Therapeutics 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 Denali Therapeutics i.e., Denali Therapeutics and Amgen go up and down completely randomly.

Pair Corralation between Denali Therapeutics and Amgen

Given the investment horizon of 90 days Denali Therapeutics is expected to under-perform the Amgen. In addition to that, Denali Therapeutics is 2.58 times more volatile than Amgen Inc. It trades about -0.05 of its total potential returns per unit of risk. Amgen Inc is currently generating about -0.14 per unit of volatility. If you would invest  31,319  in Amgen Inc on October 24, 2024 and sell it today you would lose (4,108) from holding Amgen Inc or give up 13.12% of portfolio value over 90 days.

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

Denali Therapeutics  vs.  Amgen Inc

Denali Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Denali Therapeutics 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 essential indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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.

Pair Trading with Denali Therapeutics and Amgen

The main advantage of trading using opposite Denali Therapeutics and Amgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Denali Therapeutics 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 Denali Therapeutics 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.