Correlation Between Altria and Gilead Sciences

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Can any of the company-specific risk be diversified away by investing in both Altria 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 Altria and Gilead Sciences into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Altria Group and Gilead Sciences, you can compare the effects of market volatilities on Altria 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 Altria with a short position of Gilead Sciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Altria and Gilead Sciences.

Diversification Opportunities for Altria and Gilead Sciences

-0.22
  Correlation Coefficient

Very good diversification

The 3 months correlation between Altria and Gilead is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Altria Group and Gilead Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilead Sciences and Altria 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 Altria Group 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 Altria i.e., Altria and Gilead Sciences go up and down completely randomly.

Pair Corralation between Altria and Gilead Sciences

Allowing for the 90-day total investment horizon Altria Group is expected to generate 2.08 times more return on investment than Gilead Sciences. However, Altria is 2.08 times more volatile than Gilead Sciences. It trades about 0.23 of its potential returns per unit of risk. Gilead Sciences is currently generating about 0.1 per unit of risk. If you would invest  4,010  in Altria Group on December 30, 2023 and sell it today you would earn a total of  352.00  from holding Altria Group or generate 8.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Altria Group  vs.  Gilead Sciences

 Performance 
       Timeline  
Altria Group 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Altria Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Altria may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Gilead Sciences 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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 weak 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.

Altria and Gilead Sciences Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Altria and Gilead Sciences

The main advantage of trading using opposite Altria and Gilead Sciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altria 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 Altria Group 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.
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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