Correlation Between Dell Technologies and Gilead Sciences

Can any of the company-specific risk be diversified away by investing in both Dell 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 Dell 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 Dell Technologies and Gilead Sciences, you can compare the effects of market volatilities on Dell 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 Dell Technologies with a short position of Gilead Sciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dell Technologies and Gilead Sciences.

Diversification Opportunities for Dell Technologies and Gilead Sciences

-0.02

Correlation Coefficient

Dell Technologies  Gilead Sciences

Good diversification

The 3 months correlation between Dell and Gilead is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Dell Technologies and Gilead Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilead Sciences and Dell 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 Dell 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 Dell Technologies i.e., Dell Technologies and Gilead Sciences go up and down completely randomly.

Pair Corralation between Dell Technologies and Gilead Sciences

Assuming the 90 days trading horizon Dell Technologies is expected to under-perform the Gilead Sciences. In addition to that, Dell Technologies is 2.53 times more volatile than Gilead Sciences. It trades about -0.21 of its total potential returns per unit of risk. Gilead Sciences is currently generating about -0.09 per unit of volatility. If you would invest  28,756  in Gilead Sciences on October 24, 2024 and sell it today you would lose (500.00) from holding Gilead Sciences or give up 1.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Dell Technologies  vs.  Gilead Sciences

Dell Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dell Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Dell 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

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gilead Sciences are ranked lower than 9 (%) 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 Dell Technologies and Gilead Sciences

The main advantage of trading using opposite Dell Technologies and Gilead Sciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dell 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 Dell 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.