Correlation Between Gilead Sciences and C4 Therapeutics

Can any of the company-specific risk be diversified away by investing in both Gilead Sciences and C4 Therapeutics 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 C4 Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gilead Sciences and C4 Therapeutics, you can compare the effects of market volatilities on Gilead Sciences and C4 Therapeutics 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 C4 Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gilead Sciences and C4 Therapeutics.

Diversification Opportunities for Gilead Sciences and C4 Therapeutics

-0.91

Correlation Coefficient

Gilead Sciences  C4 Therapeutics

Pay attention - limited upside

The 3 months correlation between Gilead and CCCC is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Gilead Sciences and C4 Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on C4 Therapeutics 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 C4 Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of C4 Therapeutics has no effect on the direction of Gilead Sciences i.e., Gilead Sciences and C4 Therapeutics go up and down completely randomly.

Pair Corralation between Gilead Sciences and C4 Therapeutics

Given the investment horizon of 90 days Gilead Sciences is expected to generate 0.36 times more return on investment than C4 Therapeutics. However, Gilead Sciences is 2.81 times less risky than C4 Therapeutics. It trades about 0.22 of its potential returns per unit of risk. C4 Therapeutics is currently generating about -0.23 per unit of risk. If you would invest  9,137  in Gilead Sciences on December 28, 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 Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Gilead Sciences  vs.  C4 Therapeutics

Gilead Sciences

Risk-Adjusted Performance

Good

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.

C4 Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days C4 Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Gilead Sciences and C4 Therapeutics

The main advantage of trading using opposite Gilead Sciences and C4 Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gilead Sciences position performs unexpectedly, C4 Therapeutics 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 C4 Therapeutics will offset losses from the drop in C4 Therapeutics' long position.

The idea behind Gilead Sciences and C4 Therapeutics 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.