Correlation Between Amgen and GlaxoSmithKline PLC

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

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

Diversification Opportunities for Amgen and GlaxoSmithKline PLC

-0.59

Correlation Coefficient

Amgen  GlaxoSmithKline PLC

Excellent diversification

The 3 months correlation between Amgen and GlaxoSmithKline is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and GlaxoSmithKline PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GlaxoSmithKline PLC ADR 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 GlaxoSmithKline PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GlaxoSmithKline PLC ADR has no effect on the direction of Amgen i.e., Amgen and GlaxoSmithKline PLC go up and down completely randomly.

Pair Corralation between Amgen and GlaxoSmithKline PLC

Given the investment horizon of 90 days Amgen is expected to generate 3.88 times less return on investment than GlaxoSmithKline PLC. In addition to that, Amgen is 1.06 times more volatile than GlaxoSmithKline PLC ADR. It trades about 0.01 of its total potential returns per unit of risk. GlaxoSmithKline PLC ADR is currently generating about 0.06 per unit of volatility. If you would invest  3,082  in GlaxoSmithKline PLC ADR on January 19, 2024 and sell it today you would earn a total of  878.00  from holding GlaxoSmithKline PLC ADR or generate 28.49% return on investment over 90 days.

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

Amgen Inc  vs.  GlaxoSmithKline PLC ADR

Amgen Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amgen Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

GlaxoSmithKline PLC ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GlaxoSmithKline PLC ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, GlaxoSmithKline PLC is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Amgen and GlaxoSmithKline PLC

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

The idea behind Amgen Inc and GlaxoSmithKline PLC ADR 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..