Correlation Between Gilead Sciences and INC Research

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

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

Diversification Opportunities for Gilead Sciences and INC Research

-0.3

Correlation Coefficient

Gilead Sciences  INC Research

Very good diversification

The 3 months correlation between Gilead and INC is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Gilead Sciences and INC Research Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INC Research Holdings 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 INC Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INC Research Holdings has no effect on the direction of Gilead Sciences i.e., Gilead Sciences and INC Research go up and down completely randomly.

Pair Corralation between Gilead Sciences and INC Research

Given the investment horizon of 90 days Gilead Sciences is expected to generate 0.7 times more return on investment than INC Research. However, Gilead Sciences is 1.42 times less risky than INC Research. It trades about 0.22 of its potential returns per unit of risk. INC Research Holdings is currently generating about -0.06 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Gilead Sciences  vs.  INC Research Holdings

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.

INC Research Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days INC Research Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Gilead Sciences and INC Research

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

The idea behind Gilead Sciences and INC Research Holdings 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.