Correlation Between VMware and Amgen
Can any of the company-specific risk be diversified away by investing in both VMware 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 VMware and Amgen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VMware Inc and Amgen Inc, you can compare the effects of market volatilities on VMware 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 VMware with a short position of Amgen. Check out your portfolio center. Please also check ongoing floating volatility patterns of VMware and Amgen.
Diversification Opportunities for VMware and Amgen
Weak diversification
The 3 months correlation between VMware and Amgen is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding VMware Inc and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen Inc and VMware 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 VMware 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 VMware i.e., VMware and Amgen go up and down completely randomly.
Pair Corralation between VMware and Amgen
Considering the 90-day investment horizon VMware Inc is expected to under-perform the Amgen. In addition to that, VMware is 1.39 times more volatile than Amgen Inc. It trades about -0.05 of its total potential returns per unit of risk. Amgen Inc is currently generating about 0.07 per unit of volatility. If you would invest 23,084 in Amgen Inc on January 24, 2024 and sell it today you would earn a total of 4,270 from holding Amgen Inc or generate 18.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 44.62% |
| Values | Daily Returns |
VMware Inc vs. Amgen Inc
Performance |
| Timeline |
| VMware Inc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Amgen Inc |
VMware and Amgen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VMware and Amgen
The main advantage of trading using opposite VMware and Amgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VMware 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 VMware 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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