Correlation Between GSK Plc and Amgen

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

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

Diversification Opportunities for GSK Plc and Amgen

0.78

Correlation Coefficient

GSK Plc  Amgen

Poor diversification

The 3 months correlation between GSK and Amgen is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding GSK plc and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen Inc and GSK Plc 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 GSK plc 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 GSK Plc i.e., GSK Plc and Amgen go up and down completely randomly.

Pair Corralation between GSK Plc and Amgen

Assuming the 90 days horizon GSK plc is expected to generate 1.8 times more return on investment than Amgen. However, GSK Plc is 1.8 times more volatile than Amgen Inc. It trades about 0.01 of its potential returns per unit of risk. Amgen Inc is currently generating about 0.02 per unit of risk. If you would invest  1,646  in GSK plc on September 16, 2024 and sell it today you would earn a total of  37.00  from holding GSK plc or generate 2.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.58%
Values	Daily Returns

GSK plc  vs.  Amgen Inc

GSK plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GSK plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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.

Pair Trading with GSK Plc and Amgen

The main advantage of trading using opposite GSK Plc and Amgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GSK Plc 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 GSK plc 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.