Correlation Between Gilead Sciences and Enliven Therapeutics

Can any of the company-specific risk be diversified away by investing in both Gilead Sciences and Enliven 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 Enliven 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 Enliven Therapeutics, you can compare the effects of market volatilities on Gilead Sciences and Enliven 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 Enliven Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gilead Sciences and Enliven Therapeutics.

Diversification Opportunities for Gilead Sciences and Enliven Therapeutics

-0.45

Correlation Coefficient

Gilead Sciences  Enliven Therapeutics

Very good diversification

The 3 months correlation between Gilead and Enliven is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Gilead Sciences and Enliven Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enliven 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 Enliven Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enliven Therapeutics has no effect on the direction of Gilead Sciences i.e., Gilead Sciences and Enliven Therapeutics go up and down completely randomly.

Pair Corralation between Gilead Sciences and Enliven Therapeutics

Given the investment horizon of 90 days Gilead Sciences is expected to generate 2.76 times less return on investment than Enliven Therapeutics. But when comparing it to its historical volatility, Gilead Sciences is 3.53 times less risky than Enliven Therapeutics. It trades about 0.06 of its potential returns per unit of risk. Enliven Therapeutics is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,655  in Enliven Therapeutics on October 24, 2024 and sell it today you would earn a total of  613.50  from holding Enliven Therapeutics or generate 37.07% 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.  Enliven Therapeutics

Gilead Sciences

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gilead Sciences are ranked lower than 5 (%) 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.

Enliven Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enliven Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Gilead Sciences and Enliven Therapeutics

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

The idea behind Gilead Sciences and Enliven 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.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.