Correlation Between Amgen and PACCAR

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

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

Diversification Opportunities for Amgen and PACCAR

-0.65

Correlation Coefficient

Amgen  PACCAR

Excellent diversification

The 3 months correlation between Amgen and PACCAR is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc 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 PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of Amgen i.e., Amgen and PACCAR go up and down completely randomly.

Pair Corralation between Amgen and PACCAR

Given the investment horizon of 90 days Amgen Inc is expected to under-perform the PACCAR. But the stock apears to be less risky and, when comparing its historical volatility, Amgen Inc is 1.04 times less risky than PACCAR. The stock trades about -0.2 of its potential returns per unit of risk. The PACCAR Inc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  9,579  in PACCAR Inc on September 23, 2024 and sell it today you would earn a total of  953.00  from holding PACCAR Inc or generate 9.95% return on investment over 90 days.

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

Amgen Inc  vs.  PACCAR Inc

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 unsteady 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.

PACCAR Inc

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Amgen and PACCAR

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

The idea behind Amgen Inc and PACCAR 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.