Correlation Between Amgen and Afya

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

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

Diversification Opportunities for Amgen and Afya

0.38

Correlation Coefficient

Amgen  Afya

Weak diversification

The 3 months correlation between Amgen and Afya is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and Afya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afya 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 Afya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afya has no effect on the direction of Amgen i.e., Amgen and Afya go up and down completely randomly.

Pair Corralation between Amgen and Afya

Given the investment horizon of 90 days Amgen is expected to generate 1.06 times less return on investment than Afya. But when comparing it to its historical volatility, Amgen Inc is 1.63 times less risky than Afya. It trades about 0.02 of its potential returns per unit of risk. Afya is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,549  in Afya on September 15, 2024 and sell it today you would earn a total of  15.00  from holding Afya or generate 0.97% return on investment over 90 days.

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

Amgen Inc  vs.  Afya

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 inconsistent 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.

Afya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Afya has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Afya is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Amgen and Afya

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

The idea behind Amgen Inc and Afya 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.