Correlation Between Ribbon Communications and Amgen

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

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

Diversification Opportunities for Ribbon Communications and Amgen

0.28

Correlation Coefficient

Ribbon Communications  Amgen

Modest diversification

The 3 months correlation between Ribbon and Amgen is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Ribbon Communications and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen Inc and Ribbon Communications 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 Ribbon Communications 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 Ribbon Communications i.e., Ribbon Communications and Amgen go up and down completely randomly.

Pair Corralation between Ribbon Communications and Amgen

Assuming the 90 days trading horizon Ribbon Communications is expected to under-perform the Amgen. In addition to that, Ribbon Communications is 2.64 times more volatile than Amgen Inc. It trades about -0.03 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  25,439  in Amgen Inc on December 20, 2024 and sell it today you would earn a total of  3,451  from holding Amgen Inc or generate 13.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Ribbon Communications  vs.  Amgen Inc

Ribbon Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ribbon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Amgen Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amgen Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Amgen displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ribbon Communications and Amgen

The main advantage of trading using opposite Ribbon Communications and Amgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ribbon Communications 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 Ribbon Communications 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.