Correlation Between Gilead Sciences and Biogen
Can any of the company-specific risk be diversified away by investing in both Gilead Sciences and Biogen 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 Biogen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gilead Sciences and Biogen Inc, you can compare the effects of market volatilities on Gilead Sciences and Biogen 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 Biogen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gilead Sciences and Biogen.
Diversification Opportunities for Gilead Sciences and Biogen
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Gilead and Biogen is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Gilead Sciences and Biogen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biogen Inc 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 Biogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biogen Inc has no effect on the direction of Gilead Sciences i.e., Gilead Sciences and Biogen go up and down completely randomly.
Pair Corralation between Gilead Sciences and Biogen
Given the investment horizon of 90 days Gilead Sciences is expected to generate 1.51 times more return on investment than Biogen. However, Gilead Sciences is 1.51 times more volatile than Biogen Inc. It trades about 0.05 of its potential returns per unit of risk. Biogen Inc is currently generating about -0.52 per unit of risk. If you would invest 8,876 in Gilead Sciences on August 28, 2024 and sell it today you would earn a total of 173.00 from holding Gilead Sciences or generate 1.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gilead Sciences vs. Biogen Inc
Performance |
| Timeline |
| Gilead Sciences |
| Biogen Inc |
Gilead Sciences and Biogen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gilead Sciences and Biogen
The main advantage of trading using opposite Gilead Sciences and Biogen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gilead Sciences position performs unexpectedly, Biogen 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 Biogen will offset losses from the drop in Biogen's long position.| Gilead Sciences vs. Amgen Inc | Gilead Sciences vs. Merck Company | Gilead Sciences vs. AbbVie Inc | Gilead Sciences vs. Johnson Johnson |
| Biogen vs. Bristol Myers Squibb | Biogen vs. AbbVie Inc | Biogen vs. Merck Company | Biogen vs. Gilead Sciences |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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