Correlation Between Gilead Sciences and Legend Biotech
Can any of the company-specific risk be diversified away by investing in both Gilead Sciences and Legend Biotech 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 Legend Biotech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gilead Sciences and Legend Biotech Corp, you can compare the effects of market volatilities on Gilead Sciences and Legend Biotech 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 Legend Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gilead Sciences and Legend Biotech.
Diversification Opportunities for Gilead Sciences and Legend Biotech
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Gilead and Legend is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Gilead Sciences and Legend Biotech Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legend Biotech Corp 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 Legend Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legend Biotech Corp has no effect on the direction of Gilead Sciences i.e., Gilead Sciences and Legend Biotech go up and down completely randomly.
Pair Corralation between Gilead Sciences and Legend Biotech
Given the investment horizon of 90 days Gilead Sciences is expected to generate 1.15 times less return on investment than Legend Biotech. But when comparing it to its historical volatility, Gilead Sciences is 2.94 times less risky than Legend Biotech. It trades about 0.29 of its potential returns per unit of risk. Legend Biotech Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 3,578 in Legend Biotech Corp on November 4, 2024 and sell it today you would earn a total of 232.00 from holding Legend Biotech Corp or generate 6.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gilead Sciences vs. Legend Biotech Corp
Performance |
| Timeline |
| Gilead Sciences |
| Legend Biotech Corp |
Gilead Sciences and Legend Biotech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gilead Sciences and Legend Biotech
The main advantage of trading using opposite Gilead Sciences and Legend Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gilead Sciences position performs unexpectedly, Legend Biotech 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 Legend Biotech will offset losses from the drop in Legend Biotech's long position.| Gilead Sciences vs. CytomX Therapeutics | Gilead Sciences vs. Instil Bio | Gilead Sciences vs. Spero Therapeutics | Gilead Sciences vs. Assembly Biosciences |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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