Correlation Between GMS and Amgen

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

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

Diversification Opportunities for GMS and Amgen

0.47

Correlation Coefficient

GMS  Amgen

Very weak diversification

The 3 months correlation between GMS and Amgen is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen Inc and GMS 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 GMS 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 GMS i.e., GMS and Amgen go up and down completely randomly.

Pair Corralation between GMS and Amgen

Considering the 90-day investment horizon GMS is expected to generate 12.96 times less return on investment than Amgen. In addition to that, GMS is 1.27 times more volatile than Amgen Inc. It trades about 0.01 of its total potential returns per unit of risk. Amgen Inc is currently generating about 0.21 per unit of volatility. If you would invest  26,400  in Amgen Inc on October 23, 2024 and sell it today you would earn a total of  1,081  from holding Amgen Inc or generate 4.09% return on investment over 90 days.

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

GMS Inc  vs.  Amgen Inc

GMS Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GMS Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, GMS is not utilizing all of its potentials. The current 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 latest conflicting performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with GMS and Amgen

The main advantage of trading using opposite GMS and Amgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS 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 GMS 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.