Correlation Between Brinker International and Gilead Sciences

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

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

Diversification Opportunities for Brinker International and Gilead Sciences

0.06

Correlation Coefficient

Brinker International  Gilead Sciences

Significant diversification

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

Pair Corralation between Brinker International and Gilead Sciences

Considering the 90-day investment horizon Brinker International is expected to generate 1.01 times less return on investment than Gilead Sciences. In addition to that, Brinker International is 2.51 times more volatile than Gilead Sciences. It trades about 0.08 of its total potential returns per unit of risk. Gilead Sciences is currently generating about 0.21 per unit of volatility. If you would invest  9,137  in Gilead Sciences on December 29, 2024 and sell it today you would earn a total of  1,979  from holding Gilead Sciences or generate 21.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Brinker International  vs.  Gilead Sciences

Brinker International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brinker International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Brinker International unveiled solid returns over the last few months and may actually be approaching a breakup point.

Gilead Sciences

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gilead Sciences are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating essential indicators, Gilead Sciences exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brinker International and Gilead Sciences

The main advantage of trading using opposite Brinker International and Gilead Sciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brinker International 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 Brinker International 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.