Correlation Between AMGEN and WELLS

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

By analyzing existing cross correlation between AMGEN INC 3125 and WELLS FARGO NEW, you can compare the effects of market volatilities on AMGEN and WELLS 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 WELLS. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMGEN and WELLS.

Diversification Opportunities for AMGEN and WELLS

0.72

Correlation Coefficient

AMGEN  WELLS

Poor diversification

The 3 months correlation between AMGEN and WELLS is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding AMGEN INC 3125 and WELLS FARGO NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WELLS FARGO NEW 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 3125 are associated (or correlated) with WELLS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WELLS FARGO NEW has no effect on the direction of AMGEN i.e., AMGEN and WELLS go up and down completely randomly.

Pair Corralation between AMGEN and WELLS

Assuming the 90 days trading horizon AMGEN INC 3125 is expected to under-perform the WELLS. But the bond apears to be less risky and, when comparing its historical volatility, AMGEN INC 3125 is 1.88 times less risky than WELLS. The bond trades about -0.03 of its potential returns per unit of risk. The WELLS FARGO NEW is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  9,880  in WELLS FARGO NEW on January 3, 2025 and sell it today you would earn a total of  16.00  from holding WELLS FARGO NEW or generate 0.16% return on investment over 90 days.

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

AMGEN INC 3125  vs.  WELLS FARGO NEW

AMGEN INC 3125

Risk-Adjusted Performance

Very Weak

Over the last 90 days AMGEN INC 3125 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AMGEN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

WELLS FARGO NEW

Risk-Adjusted Performance

Very Weak

Over the last 90 days WELLS FARGO NEW has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, WELLS is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AMGEN and WELLS

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

The idea behind AMGEN INC 3125 and WELLS FARGO NEW 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.