Correlation Between Gilead Sciences and Avantor

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

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

Diversification Opportunities for Gilead Sciences and Avantor

-0.46

Correlation Coefficient

Gilead Sciences  Avantor

Very good diversification

The 3 months correlation between Gilead and Avantor is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Gilead Sciences and Avantor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantor and Gilead Sciences 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 Gilead Sciences are associated (or correlated) with Avantor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantor has no effect on the direction of Gilead Sciences i.e., Gilead Sciences and Avantor go up and down completely randomly.

Pair Corralation between Gilead Sciences and Avantor

Given the investment horizon of 90 days Gilead Sciences is expected to generate 0.72 times more return on investment than Avantor. However, Gilead Sciences is 1.38 times less risky than Avantor. It trades about 0.03 of its potential returns per unit of risk. Avantor is currently generating about 0.0 per unit of risk. If you would invest  7,901  in Gilead Sciences on October 5, 2024 and sell it today you would earn a total of  1,287  from holding Gilead Sciences or generate 16.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Gilead Sciences  vs.  Avantor

Gilead Sciences

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gilead Sciences are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating essential indicators, Gilead Sciences may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Avantor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avantor has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Gilead Sciences and Avantor

The main advantage of trading using opposite Gilead Sciences and Avantor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gilead Sciences position performs unexpectedly, Avantor 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 Avantor will offset losses from the drop in Avantor's long position.

The idea behind Gilead Sciences and Avantor 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.