Correlation Between Nasdaq and AMGEN

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

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

Diversification Opportunities for Nasdaq and AMGEN

-0.58

Correlation Coefficient

Nasdaq  AMGEN

Excellent diversification

The 3 months correlation between Nasdaq and AMGEN is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and AMGEN INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMGEN INC and Nasdaq 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 Nasdaq Inc 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 Nasdaq i.e., Nasdaq and AMGEN go up and down completely randomly.

Pair Corralation between Nasdaq and AMGEN

Given the investment horizon of 90 days Nasdaq is expected to generate 17.6 times less return on investment than AMGEN. But when comparing it to its historical volatility, Nasdaq Inc is 44.93 times less risky than AMGEN. It trades about 0.12 of its potential returns per unit of risk. AMGEN INC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7,626  in AMGEN INC on September 12, 2024 and sell it today you would earn a total of  25.00  from holding AMGEN INC or generate 0.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.59%
Values	Daily Returns

Nasdaq Inc  vs.  AMGEN INC

Nasdaq Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Nasdaq and AMGEN

The main advantage of trading using opposite Nasdaq and AMGEN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 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 Nasdaq Inc 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.