Correlation Between Emergent Biosolutions and Amgen

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

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

Diversification Opportunities for Emergent Biosolutions and Amgen

0.69

Correlation Coefficient

Emergent Biosolutions  Amgen

Poor diversification

The 3 months correlation between Emergent and Amgen is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Emergent Biosolutions and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen Inc and Emergent Biosolutions 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 Emergent Biosolutions 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 Emergent Biosolutions i.e., Emergent Biosolutions and Amgen go up and down completely randomly.

Pair Corralation between Emergent Biosolutions and Amgen

Considering the 90-day investment horizon Emergent Biosolutions is expected to generate 1.48 times less return on investment than Amgen. In addition to that, Emergent Biosolutions is 5.66 times more volatile than Amgen Inc. It trades about 0.01 of its total potential returns per unit of risk. Amgen Inc is currently generating about 0.1 per unit of volatility. If you would invest  21,875  in Amgen Inc on February 15, 2024 and sell it today you would earn a total of  9,494  from holding Amgen Inc or generate 43.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Emergent Biosolutions  vs.  Amgen Inc

Emergent Biosolutions

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Emergent Biosolutions are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental drivers, Emergent Biosolutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

Amgen Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Amgen Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Amgen may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Emergent Biosolutions and Amgen

The main advantage of trading using opposite Emergent Biosolutions and Amgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emergent Biosolutions 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 Emergent Biosolutions 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.