Correlation Between Amgen and Heating Oil

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

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

Diversification Opportunities for Amgen and Heating Oil

-0.76

Correlation Coefficient

Amgen  Heating Oil

Pay attention - limited upside

The 3 months correlation between Amgen and Heating is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and Heating Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heating Oil and Amgen 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 Amgen Inc are associated (or correlated) with Heating Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heating Oil has no effect on the direction of Amgen i.e., Amgen and Heating Oil go up and down completely randomly.

Pair Corralation between Amgen and Heating Oil

Given the investment horizon of 90 days Amgen Inc is expected to generate 1.02 times more return on investment than Heating Oil. However, Amgen is 1.02 times more volatile than Heating Oil. It trades about 0.12 of its potential returns per unit of risk. Heating Oil is currently generating about -0.24 per unit of risk. If you would invest  29,818  in Amgen Inc on March 8, 2024 and sell it today you would earn a total of  920.00  from holding Amgen Inc or generate 3.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Amgen Inc  vs.  Heating Oil

Amgen Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amgen Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Amgen displayed solid returns over the last few months and may actually be approaching a breakup point.

Heating Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heating Oil 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 Commodity's basic indicators remain rather sound which may send shares a bit higher in July 2024. The latest tumult may also be a sign of longer-term up-swing for Heating Oil shareholders.

Pair Trading with Amgen and Heating Oil

The main advantage of trading using opposite Amgen and Heating Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amgen position performs unexpectedly, Heating Oil 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 Heating Oil will offset losses from the drop in Heating Oil's long position.

The idea behind Amgen Inc and Heating Oil 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.