Correlation Between Delta Air and Gilead Sciences

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

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

Diversification Opportunities for Delta Air and Gilead Sciences

0.61

Correlation Coefficient

Delta Air  Gilead Sciences

Poor diversification

The 3 months correlation between Delta and Gilead is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Gilead Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilead Sciences and Delta Air 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 Delta Air Lines 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 Delta Air i.e., Delta Air and Gilead Sciences go up and down completely randomly.

Pair Corralation between Delta Air and Gilead Sciences

Assuming the 90 days trading horizon Delta Air Lines is expected to under-perform the Gilead Sciences. In addition to that, Delta Air is 1.24 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 0.03 per unit of volatility. 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	Significant
Accuracy	94.44%
Values	Daily Returns

Delta Air Lines  vs.  Gilead Sciences

Delta Air Lines

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Delta Air sustained solid returns over the last few months and may actually be approaching a breakup point.

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 Delta Air and Gilead Sciences

The main advantage of trading using opposite Delta Air and Gilead Sciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air 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 Delta Air Lines 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.