Correlation Between Amgen and Electromed

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

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

Diversification Opportunities for Amgen and Electromed

0.28

Correlation Coefficient

Amgen  Electromed

Modest diversification

The 3 months correlation between Amgen and Electromed is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and Electromed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electromed and Amgen 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 Amgen Inc are associated (or correlated) with Electromed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electromed has no effect on the direction of Amgen i.e., Amgen and Electromed go up and down completely randomly.

Pair Corralation between Amgen and Electromed

Given the investment horizon of 90 days Amgen Inc is expected to generate 0.58 times more return on investment than Electromed. However, Amgen Inc is 1.72 times less risky than Electromed. It trades about 0.11 of its potential returns per unit of risk. Electromed is currently generating about -0.03 per unit of risk. If you would invest  27,094  in Amgen Inc on March 7, 2024 and sell it today you would earn a total of  3,643  from holding Amgen Inc or generate 13.45% return on investment over 90 days.

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

Amgen Inc  vs.  Electromed

Amgen Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amgen Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, Amgen displayed solid returns over the last few months and may actually be approaching a breakup point.

Electromed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electromed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Electromed is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Amgen and Electromed

The main advantage of trading using opposite Amgen and Electromed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amgen position performs unexpectedly, Electromed 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 Electromed will offset losses from the drop in Electromed's long position.

The idea behind Amgen Inc and Electromed 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.