Correlation Between Gilead Sciences and Humacyte

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

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

Diversification Opportunities for Gilead Sciences and Humacyte

-0.46

Correlation Coefficient

Gilead Sciences  Humacyte

Very good diversification

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

Pair Corralation between Gilead Sciences and Humacyte

Given the investment horizon of 90 days Gilead Sciences is expected to generate 0.28 times more return on investment than Humacyte. However, Gilead Sciences is 3.52 times less risky than Humacyte. It trades about 0.18 of its potential returns per unit of risk. Humacyte is currently generating about -0.04 per unit of risk. If you would invest  7,896  in Gilead Sciences on September 2, 2024 and sell it today you would earn a total of  1,362  from holding Gilead Sciences or generate 17.25% 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.  Humacyte

Gilead Sciences

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gilead Sciences are ranked lower than 14 (%) 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.

Humacyte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Humacyte has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Gilead Sciences and Humacyte

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

The idea behind Gilead Sciences and Humacyte 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.