Correlation Between Akamai Technologies, and Gilead Sciences

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

By analyzing existing cross correlation between Akamai Technologies, and Gilead Sciences, you can compare the effects of market volatilities on Akamai Technologies, 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 Akamai Technologies, with a short position of Gilead Sciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Akamai Technologies, and Gilead Sciences.

Diversification Opportunities for Akamai Technologies, and Gilead Sciences

0.06

Correlation Coefficient

Akamai Technologies,  Gilead Sciences

Significant diversification

The 3 months correlation between Akamai and Gilead is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Akamai Technologies, and Gilead Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilead Sciences and Akamai Technologies, 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 Akamai Technologies, 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 Akamai Technologies, i.e., Akamai Technologies, and Gilead Sciences go up and down completely randomly.

Pair Corralation between Akamai Technologies, and Gilead Sciences

Assuming the 90 days trading horizon Akamai Technologies, is expected to under-perform the Gilead Sciences. But the stock apears to be less risky and, when comparing its historical volatility, Akamai Technologies, is 1.24 times less risky than Gilead Sciences. The stock trades about -0.32 of its potential returns per unit of risk. The Gilead Sciences is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  27,517  in Gilead Sciences on October 10, 2024 and sell it today you would earn a total of  142.00  from holding Gilead Sciences or generate 0.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	89.47%
Values	Daily Returns

Akamai Technologies,  vs.  Gilead Sciences

Akamai Technologies,

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Akamai Technologies, are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking signals, Akamai Technologies, is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Gilead Sciences

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gilead Sciences are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Gilead Sciences sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Akamai Technologies, and Gilead Sciences

The main advantage of trading using opposite Akamai Technologies, and Gilead Sciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Akamai Technologies, 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 Akamai Technologies, 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.

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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.