Correlation Between Coca Cola and Amgen

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

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

Diversification Opportunities for Coca Cola and Amgen

0.76

Correlation Coefficient

Coca Cola  Amgen

Poor diversification

The 3 months correlation between Coca and Amgen is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen Inc and Coca Cola 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 The Coca Cola 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 Coca Cola i.e., Coca Cola and Amgen go up and down completely randomly.

Pair Corralation between Coca Cola and Amgen

Allowing for the 90-day total investment horizon Coca Cola is expected to generate 1.74 times less return on investment than Amgen. But when comparing it to its historical volatility, The Coca Cola is 1.79 times less risky than Amgen. It trades about 0.02 of its potential returns per unit of risk. Amgen Inc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  24,547  in Amgen Inc on September 23, 2024 and sell it today you would earn a total of  1,791  from holding Amgen Inc or generate 7.3% return on investment over 90 days.

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

The Coca Cola  vs.  Amgen Inc

Coca Cola

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Coca Cola has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm 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 unsteady 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 Coca Cola and Amgen

The main advantage of trading using opposite Coca Cola and Amgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola 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 The Coca Cola 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.