Correlation Between Gilead Sciences and AstraZeneca PLC
Can any of the company-specific risk be diversified away by investing in both Gilead Sciences and AstraZeneca 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 Gilead Sciences and AstraZeneca PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gilead Sciences and AstraZeneca PLC ADR, you can compare the effects of market volatilities on Gilead Sciences and AstraZeneca 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 Gilead Sciences with a short position of AstraZeneca PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gilead Sciences and AstraZeneca PLC.
Diversification Opportunities for Gilead Sciences and AstraZeneca PLC
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Gilead and AstraZeneca is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Gilead Sciences and AstraZeneca PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC ADR 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 AstraZeneca PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AstraZeneca PLC ADR has no effect on the direction of Gilead Sciences i.e., Gilead Sciences and AstraZeneca PLC go up and down completely randomly.
Pair Corralation between Gilead Sciences and AstraZeneca PLC
Given the investment horizon of 90 days Gilead Sciences is expected to generate 1.22 times more return on investment than AstraZeneca PLC. However, Gilead Sciences is 1.22 times more volatile than AstraZeneca PLC ADR. It trades about 0.19 of its potential returns per unit of risk. AstraZeneca PLC ADR is currently generating about 0.2 per unit of risk. If you would invest 8,772 in Gilead Sciences on November 18, 2024 and sell it today you would earn a total of 1,636 from holding Gilead Sciences or generate 18.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gilead Sciences vs. AstraZeneca PLC ADR
Performance |
| Timeline |
| Gilead Sciences |
| AstraZeneca PLC ADR |
Gilead Sciences and AstraZeneca PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gilead Sciences and AstraZeneca PLC
The main advantage of trading using opposite Gilead Sciences and AstraZeneca PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gilead Sciences position performs unexpectedly, AstraZeneca 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 AstraZeneca PLC will offset losses from the drop in AstraZeneca PLC's long position.| Gilead Sciences vs. Amgen Inc | Gilead Sciences vs. Merck Company | Gilead Sciences vs. AbbVie Inc | Gilead Sciences vs. Johnson Johnson |
| AstraZeneca PLC vs. Novartis AG ADR | AstraZeneca PLC vs. GlaxoSmithKline PLC ADR | AstraZeneca PLC vs. Roche Holding Ltd | AstraZeneca PLC vs. Bristol Myers Squibb |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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