Correlation Between Biogen and Gilead Sciences

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

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

Diversification Opportunities for Biogen and Gilead Sciences

-0.77

Correlation Coefficient

Biogen  Gilead Sciences

Pay attention - limited upside

The 3 months correlation between Biogen and Gilead is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Biogen Inc and Gilead Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilead Sciences and Biogen 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 Biogen 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 Biogen i.e., Biogen and Gilead Sciences go up and down completely randomly.

Pair Corralation between Biogen and Gilead Sciences

Assuming the 90 days trading horizon Biogen Inc is expected to generate 0.72 times more return on investment than Gilead Sciences. However, Biogen Inc is 1.38 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 -0.09 per unit of risk. If you would invest  15,500  in Biogen Inc on October 13, 2024 and sell it today you would lose (290.00) from holding Biogen Inc or give up 1.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

Biogen Inc  vs.  Gilead Sciences

Biogen Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biogen Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Gilead Sciences

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gilead Sciences are ranked lower than 11 (%) 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 Biogen and Gilead Sciences

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

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.