Correlation Between Large Cap and Amgen

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

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

Diversification Opportunities for Large Cap and Amgen

0.55

Correlation Coefficient

Large Cap  Amgen

Very weak diversification

The 3 months correlation between Large and Amgen is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Fund and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen Inc and Large Cap 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 Large Cap Fund 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 Large Cap i.e., Large Cap and Amgen go up and down completely randomly.

Pair Corralation between Large Cap and Amgen

Assuming the 90 days horizon Large Cap is expected to generate 2.67 times less return on investment than Amgen. But when comparing it to its historical volatility, Large Cap Fund is 4.76 times less risky than Amgen. It trades about 0.46 of its potential returns per unit of risk. Amgen Inc is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  26,999  in Amgen Inc on February 21, 2024 and sell it today you would earn a total of  4,489  from holding Amgen Inc or generate 16.63% return on investment over 90 days.

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

Large Cap Fund  vs.  Amgen Inc

Large Cap Fund

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Large Cap Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Large Cap may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Amgen Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amgen Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Amgen may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Large Cap and Amgen

The main advantage of trading using opposite Large Cap and Amgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Cap 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 Large Cap Fund 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.