Correlation Between Apple and Gilead Sciences

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

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

Diversification Opportunities for Apple and Gilead Sciences

0.83

Correlation Coefficient

Apple  Gilead Sciences

Very poor diversification

The 3 months correlation between Apple and Gilead is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Gilead Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilead Sciences and Apple 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 Apple 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 Apple i.e., Apple and Gilead Sciences go up and down completely randomly.

Pair Corralation between Apple and Gilead Sciences

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.5 times more return on investment than Gilead Sciences. However, Apple Inc is 2.0 times less risky than Gilead Sciences. It trades about 0.1 of its potential returns per unit of risk. Gilead Sciences is currently generating about 0.03 per unit of risk. If you would invest  3,624  in Apple Inc on October 14, 2024 and sell it today you would earn a total of  3,578  from holding Apple Inc or generate 98.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	81.09%
Values	Daily Returns

Apple Inc  vs.  Gilead Sciences

Apple Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Gilead Sciences

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gilead Sciences are ranked lower than 10 (%) 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 Apple and Gilead Sciences

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

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.