Correlation Between Stem and Amgen
Can any of the company-specific risk be diversified away by investing in both Stem 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 Stem and Amgen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stem Inc and Amgen Inc, you can compare the effects of market volatilities on Stem 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 Stem with a short position of Amgen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stem and Amgen.
Diversification Opportunities for Stem and Amgen
Very poor diversification
The 3 months correlation between Stem and Amgen is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Stem Inc and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen Inc and Stem 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 Stem 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 Stem i.e., Stem and Amgen go up and down completely randomly.
Pair Corralation between Stem and Amgen
Given the investment horizon of 90 days Stem Inc is expected to under-perform the Amgen. In addition to that, Stem is 5.73 times more volatile than Amgen Inc. It trades about -0.11 of its total potential returns per unit of risk. Amgen Inc is currently generating about -0.05 per unit of volatility. If you would invest 27,305 in Amgen Inc on January 20, 2024 and sell it today you would lose (412.00) from holding Amgen Inc or give up 1.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stem Inc vs. Amgen Inc
Performance |
| Timeline |
| Stem Inc |
| Amgen Inc |
Stem and Amgen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stem and Amgen
The main advantage of trading using opposite Stem and Amgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stem 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.| Stem vs. Palo Alto Networks | Stem vs. Crowdstrike Holdings | Stem vs. Cloudflare | Stem vs. Palantir TechnologiesInc |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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