Correlation Between Amgen and Roche Holding

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

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

Diversification Opportunities for Amgen and Roche Holding

0.58

Correlation Coefficient

Amgen  Roche Holding

Very weak diversification

The 3 months correlation between Amgen and Roche is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and Roche Holding Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roche Holding 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 Roche Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roche Holding has no effect on the direction of Amgen i.e., Amgen and Roche Holding go up and down completely randomly.

Pair Corralation between Amgen and Roche Holding

Given the investment horizon of 90 days Amgen Inc is expected to generate 0.95 times more return on investment than Roche Holding. However, Amgen Inc is 1.05 times less risky than Roche Holding. It trades about 0.03 of its potential returns per unit of risk. Roche Holding Ltd is currently generating about -0.03 per unit of risk. If you would invest  22,431  in Amgen Inc on January 29, 2024 and sell it today you would earn a total of  4,567  from holding Amgen Inc or generate 20.36% return on investment over 90 days.

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

Amgen Inc  vs.  Roche Holding Ltd

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 weak 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.

Roche Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roche Holding Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Amgen and Roche Holding

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

The idea behind Amgen Inc and Roche Holding Ltd 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.