Correlation Between Gilead Sciences and Applied Materials
Can any of the company-specific risk be diversified away by investing in both Gilead Sciences and Applied Materials 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 Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gilead Sciences and Applied Materials, you can compare the effects of market volatilities on Gilead Sciences and Applied Materials 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 Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gilead Sciences and Applied Materials.
Diversification Opportunities for Gilead Sciences and Applied Materials
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Gilead and Applied is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Gilead Sciences and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Gilead Sciences i.e., Gilead Sciences and Applied Materials go up and down completely randomly.
Pair Corralation between Gilead Sciences and Applied Materials
Assuming the 90 days trading horizon Gilead Sciences is expected to generate 0.57 times more return on investment than Applied Materials. However, Gilead Sciences is 1.75 times less risky than Applied Materials. It trades about -0.12 of its potential returns per unit of risk. Applied Materials is currently generating about -0.14 per unit of risk. If you would invest 195,300 in Gilead Sciences on September 13, 2024 and sell it today you would lose (10,300) from holding Gilead Sciences or give up 5.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Gilead Sciences vs. Applied Materials
Performance |
| Timeline |
| Gilead Sciences |
| Applied Materials |
Gilead Sciences and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gilead Sciences and Applied Materials
The main advantage of trading using opposite Gilead Sciences and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gilead Sciences position performs unexpectedly, Applied Materials 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 Applied Materials will offset losses from the drop in Applied Materials' long position.| Gilead Sciences vs. KB Home | Gilead Sciences vs. DXC Technology | Gilead Sciences vs. McEwen Mining | Gilead Sciences vs. Verizon Communications |
| Applied Materials vs. Southwest Airlines | Applied Materials vs. United Airlines Holdings | Applied Materials vs. Verizon Communications | Applied Materials vs. GMxico Transportes SAB |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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