Correlation Between Amgen and GENERAL

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

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

Diversification Opportunities for Amgen and GENERAL

-0.19

Correlation Coefficient

Amgen  GENERAL

Good diversification

The 3 months correlation between Amgen and GENERAL is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and GENERAL ELEC CAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GENERAL ELEC CAP 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 GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GENERAL ELEC CAP has no effect on the direction of Amgen i.e., Amgen and GENERAL go up and down completely randomly.

Pair Corralation between Amgen and GENERAL

Given the investment horizon of 90 days Amgen Inc is expected to under-perform the GENERAL. But the stock apears to be less risky and, when comparing its historical volatility, Amgen Inc is 1.4 times less risky than GENERAL. The stock trades about -0.17 of its potential returns per unit of risk. The GENERAL ELEC CAP is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  8,965  in GENERAL ELEC CAP on September 14, 2024 and sell it today you would lose (90.00) from holding GENERAL ELEC CAP or give up 1.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	44.44%
Values	Daily Returns

Amgen Inc  vs.  GENERAL ELEC CAP

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.

GENERAL ELEC CAP

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Amgen and GENERAL

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

The idea behind Amgen Inc and GENERAL ELEC CAP 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.