Correlation Between Tandy Leather and Amgen

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

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

Diversification Opportunities for Tandy Leather and Amgen

-0.47

Correlation Coefficient

Tandy Leather  Amgen

Very good diversification

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

Pair Corralation between Tandy Leather and Amgen

Considering the 90-day investment horizon Tandy Leather Factory is expected to generate 1.51 times more return on investment than Amgen. However, Tandy Leather is 1.51 times more volatile than Amgen Inc. It trades about 0.03 of its potential returns per unit of risk. Amgen Inc is currently generating about 0.01 per unit of risk. If you would invest  425.00  in Tandy Leather Factory on October 1, 2024 and sell it today you would earn a total of  59.00  from holding Tandy Leather Factory or generate 13.88% return on investment over 90 days.

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

Tandy Leather Factory  vs.  Amgen Inc

Tandy Leather Factory

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tandy Leather Factory are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating essential indicators, Tandy Leather reported solid returns over the last few months and may actually be approaching a breakup point.

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 Tandy Leather and Amgen

The main advantage of trading using opposite Tandy Leather and Amgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tandy Leather 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 Tandy Leather Factory 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.