Correlation Between Gilead Sciences and Cabaletta Bio

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

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

Diversification Opportunities for Gilead Sciences and Cabaletta Bio

-0.79

Correlation Coefficient

Gilead Sciences  Cabaletta Bio

Pay attention - limited upside

The 3 months correlation between Gilead and Cabaletta is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Gilead Sciences and Cabaletta Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabaletta Bio 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 Cabaletta Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabaletta Bio has no effect on the direction of Gilead Sciences i.e., Gilead Sciences and Cabaletta Bio go up and down completely randomly.

Pair Corralation between Gilead Sciences and Cabaletta Bio

Given the investment horizon of 90 days Gilead Sciences is expected to generate 0.29 times more return on investment than Cabaletta Bio. However, Gilead Sciences is 3.47 times less risky than Cabaletta Bio. It trades about 0.22 of its potential returns per unit of risk. Cabaletta Bio is currently generating about -0.08 per unit of risk. If you would invest  9,137  in Gilead Sciences on December 29, 2024 and sell it today you would earn a total of  2,042  from holding Gilead Sciences or generate 22.35% return on investment over 90 days.

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

Gilead Sciences  vs.  Cabaletta Bio

Gilead Sciences

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gilead Sciences are ranked lower than 17 (%) 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.

Cabaletta Bio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cabaletta Bio 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 fundamental drivers remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Gilead Sciences and Cabaletta Bio

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

The idea behind Gilead Sciences and Cabaletta Bio 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.