Correlation Between Gilead Sciences and Alx Oncology

Can any of the company-specific risk be diversified away by investing in both Gilead Sciences and Alx Oncology 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 Alx Oncology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gilead Sciences and Alx Oncology Holdings, you can compare the effects of market volatilities on Gilead Sciences and Alx Oncology 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 Alx Oncology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gilead Sciences and Alx Oncology.

Diversification Opportunities for Gilead Sciences and Alx Oncology

-0.43

Correlation Coefficient

Gilead Sciences  Alx Oncology

Very good diversification

The 3 months correlation between Gilead and Alx is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Gilead Sciences and Alx Oncology Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alx Oncology Holdings 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 Alx Oncology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alx Oncology Holdings has no effect on the direction of Gilead Sciences i.e., Gilead Sciences and Alx Oncology go up and down completely randomly.

Pair Corralation between Gilead Sciences and Alx Oncology

Given the investment horizon of 90 days Gilead Sciences is expected to generate 0.19 times more return on investment than Alx Oncology. However, Gilead Sciences is 5.32 times less risky than Alx Oncology. It trades about -0.16 of its potential returns per unit of risk. Alx Oncology Holdings is currently generating about -0.11 per unit of risk. If you would invest  7,189  in Gilead Sciences on March 6, 2024 and sell it today you would lose (773.00) from holding Gilead Sciences or give up 10.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Gilead Sciences  vs.  Alx Oncology Holdings

Gilead Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gilead Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Alx Oncology Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alx Oncology Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in July 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Gilead Sciences and Alx Oncology

The main advantage of trading using opposite Gilead Sciences and Alx Oncology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gilead Sciences position performs unexpectedly, Alx Oncology 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 Alx Oncology will offset losses from the drop in Alx Oncology's long position.

The idea behind Gilead Sciences and Alx Oncology Holdings 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.

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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.