Correlation Between Gilead Sciences and National Grid
Can any of the company-specific risk be diversified away by investing in both Gilead Sciences and National Grid 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 Gilead Sciences and National Grid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gilead Sciences and National Grid PLC, you can compare the effects of market volatilities on Gilead Sciences and National Grid 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 Gilead Sciences with a short position of National Grid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gilead Sciences and National Grid.
Diversification Opportunities for Gilead Sciences and National Grid
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Gilead and National is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Gilead Sciences and National Grid PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Grid PLC and Gilead Sciences 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 Gilead Sciences are associated (or correlated) with National Grid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Grid PLC has no effect on the direction of Gilead Sciences i.e., Gilead Sciences and National Grid go up and down completely randomly.
Pair Corralation between Gilead Sciences and National Grid
Assuming the 90 days trading horizon Gilead Sciences is expected to generate 1.8 times more return on investment than National Grid. However, Gilead Sciences is 1.8 times more volatile than National Grid PLC. It trades about 0.04 of its potential returns per unit of risk. National Grid PLC is currently generating about 0.0 per unit of risk. If you would invest 8,886 in Gilead Sciences on August 29, 2024 and sell it today you would earn a total of 136.00 from holding Gilead Sciences or generate 1.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gilead Sciences vs. National Grid PLC
Performance |
| Timeline |
| Gilead Sciences |
| National Grid PLC |
Gilead Sciences and National Grid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gilead Sciences and National Grid
The main advantage of trading using opposite Gilead Sciences and National Grid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gilead Sciences position performs unexpectedly, National Grid 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 National Grid will offset losses from the drop in National Grid's long position.| Gilead Sciences vs. Samsung Electronics Co | Gilead Sciences vs. Samsung Electronics Co | Gilead Sciences vs. Hyundai Motor | Gilead Sciences vs. Toyota Motor Corp |
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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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