Correlation Between HP and Gilead Sciences
Can any of the company-specific risk be diversified away by investing in both HP and Gilead Sciences 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 HP and Gilead Sciences into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and Gilead Sciences, you can compare the effects of market volatilities on HP and Gilead Sciences 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 HP with a short position of Gilead Sciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Gilead Sciences.
Diversification Opportunities for HP and Gilead Sciences
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HP and Gilead is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and Gilead Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilead Sciences and HP 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 HP Inc are associated (or correlated) with Gilead Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gilead Sciences has no effect on the direction of HP i.e., HP and Gilead Sciences go up and down completely randomly.
Pair Corralation between HP and Gilead Sciences
Considering the 90-day investment horizon HP Inc is expected to under-perform the Gilead Sciences. In addition to that, HP is 1.49 times more volatile than Gilead Sciences. It trades about -0.09 of its total potential returns per unit of risk. Gilead Sciences is currently generating about 0.12 per unit of volatility. If you would invest 8,808 in Gilead Sciences on August 30, 2024 and sell it today you would earn a total of 433.00 from holding Gilead Sciences or generate 4.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HP Inc vs. Gilead Sciences
Performance |
| Timeline |
| HP Inc |
| Gilead Sciences |
HP and Gilead Sciences Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and Gilead Sciences
The main advantage of trading using opposite HP and Gilead Sciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, Gilead Sciences 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 Gilead Sciences will offset losses from the drop in Gilead Sciences' long position.The idea behind HP Inc and Gilead Sciences pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Gilead Sciences vs. Ikena Oncology | Gilead Sciences vs. Eliem Therapeutics | Gilead Sciences vs. HCW Biologics | Gilead Sciences vs. Tempest Therapeutics |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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