Correlation Between Cisco Systems and AMGEN

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

By analyzing existing cross correlation between Cisco Systems and AMGEN INC, you can compare the effects of market volatilities on Cisco Systems 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 Cisco Systems with a short position of AMGEN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and AMGEN.

Diversification Opportunities for Cisco Systems and AMGEN

-0.63

Correlation Coefficient

Cisco Systems  AMGEN

Excellent diversification

The 3 months correlation between Cisco and AMGEN is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and AMGEN INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMGEN INC and Cisco Systems 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 Cisco Systems 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 Cisco Systems i.e., Cisco Systems and AMGEN go up and down completely randomly.

Pair Corralation between Cisco Systems and AMGEN

Given the investment horizon of 90 days Cisco Systems is expected to generate 3.17 times more return on investment than AMGEN. However, Cisco Systems is 3.17 times more volatile than AMGEN INC. It trades about 0.05 of its potential returns per unit of risk. AMGEN INC is currently generating about 0.01 per unit of risk. If you would invest  4,525  in Cisco Systems on September 5, 2024 and sell it today you would earn a total of  1,423  from holding Cisco Systems or generate 31.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.39%
Values	Daily Returns

Cisco Systems  vs.  AMGEN INC

Cisco Systems

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Cisco Systems displayed solid returns over the last few months and may actually be approaching a breakup point.

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. Despite somewhat strong basic indicators, AMGEN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cisco Systems and AMGEN

The main advantage of trading using opposite Cisco Systems and AMGEN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems 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 Cisco Systems 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.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.