Correlation Between Gilead Sciences and Amgen

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Can any of the company-specific risk be diversified away by investing in both Gilead Sciences 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 Gilead Sciences and Amgen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gilead Sciences and Amgen Inc, you can compare the effects of market volatilities on Gilead Sciences 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 Gilead Sciences with a short position of Amgen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gilead Sciences and Amgen.

Diversification Opportunities for Gilead Sciences and Amgen

0.14
  Correlation Coefficient

Average diversification

The 13 months correlation between Gilead and Amgen is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Gilead Sciences and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen Inc and Gilead Sciences 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 Gilead Sciences 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 Gilead Sciences i.e., Gilead Sciences and Amgen go up and down completely randomly.

Pair Corralation between Gilead Sciences and Amgen

Given the investment horizon of 90 days Gilead Sciences is expected to under-perform the Amgen. In addition to that, Gilead Sciences is 1.01 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 0.07 per unit of volatility. If you would invest  22,746  in Amgen Inc on December 29, 2023 and sell it today you would earn a total of  5,884  from holding Amgen Inc or generate 25.87% return on investment over 90 days.
Time Period13 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Gilead Sciences  vs.  Amgen Inc

 Performance 
       Timeline  
Gilead Sciences 

Risk-Adjusted Performance

0 of 100

 
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Very Weak
Over the last 90 days Gilead Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Gilead Sciences is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
Amgen Inc 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Amgen Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Amgen is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Gilead Sciences and Amgen Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gilead Sciences and Amgen

The main advantage of trading using opposite Gilead Sciences and Amgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gilead Sciences 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 Gilead Sciences 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.
Check out your portfolio center.
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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