Correlation Between Amgen and Catalyst Pharmaceuticals

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

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

Diversification Opportunities for Amgen and Catalyst Pharmaceuticals

-0.36

Correlation Coefficient

Amgen  Catalyst Pharmaceuticals

Very good diversification

The 3 months correlation between Amgen and Catalyst is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and Catalyst Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Pharmaceuticals 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 Catalyst Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Pharmaceuticals has no effect on the direction of Amgen i.e., Amgen and Catalyst Pharmaceuticals go up and down completely randomly.

Pair Corralation between Amgen and Catalyst Pharmaceuticals

Given the investment horizon of 90 days Amgen Inc is expected to under-perform the Catalyst Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Amgen Inc is 1.13 times less risky than Catalyst Pharmaceuticals. The stock trades about -0.13 of its potential returns per unit of risk. The Catalyst Pharmaceuticals is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,974  in Catalyst Pharmaceuticals on September 2, 2024 and sell it today you would earn a total of  233.00  from holding Catalyst Pharmaceuticals or generate 11.8% return on investment over 90 days.

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

Amgen Inc  vs.  Catalyst Pharmaceuticals

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.

Catalyst Pharmaceuticals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Pharmaceuticals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Catalyst Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Amgen and Catalyst Pharmaceuticals

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

The idea behind Amgen Inc and Catalyst Pharmaceuticals 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.