Correlation Between Prelude TherapeuticsInc and Amgen

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

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

Diversification Opportunities for Prelude TherapeuticsInc and Amgen

-0.43

Correlation Coefficient

Prelude TherapeuticsInc  Amgen

Very good diversification

The 3 months correlation between Prelude and Amgen is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Prelude TherapeuticsInc and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen Inc and Prelude TherapeuticsInc 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 Prelude TherapeuticsInc 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 Prelude TherapeuticsInc i.e., Prelude TherapeuticsInc and Amgen go up and down completely randomly.

Pair Corralation between Prelude TherapeuticsInc and Amgen

Given the investment horizon of 90 days Prelude TherapeuticsInc is expected to generate 1.91 times less return on investment than Amgen. In addition to that, Prelude TherapeuticsInc is 1.69 times more volatile than Amgen Inc. It trades about 0.06 of its total potential returns per unit of risk. Amgen Inc is currently generating about 0.2 per unit of volatility. If you would invest  27,161  in Amgen Inc on February 23, 2024 and sell it today you would earn a total of  3,489  from holding Amgen Inc or generate 12.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Prelude TherapeuticsInc  vs.  Amgen Inc

Prelude TherapeuticsInc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Prelude TherapeuticsInc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Prelude TherapeuticsInc may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Amgen Inc

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Amgen Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile 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 Prelude TherapeuticsInc and Amgen

The main advantage of trading using opposite Prelude TherapeuticsInc and Amgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prelude TherapeuticsInc 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 Prelude TherapeuticsInc 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.