Correlation Between Gilead Sciences and Lexaria Bioscience

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

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

Diversification Opportunities for Gilead Sciences and Lexaria Bioscience

-0.65

Correlation Coefficient

Gilead Sciences  Lexaria Bioscience

Excellent diversification

The 3 months correlation between Gilead and Lexaria is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Gilead Sciences and Lexaria Bioscience Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lexaria Bioscience Corp 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 Lexaria Bioscience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lexaria Bioscience Corp has no effect on the direction of Gilead Sciences i.e., Gilead Sciences and Lexaria Bioscience go up and down completely randomly.

Pair Corralation between Gilead Sciences and Lexaria Bioscience

Given the investment horizon of 90 days Gilead Sciences is expected to under-perform the Lexaria Bioscience. But the stock apears to be less risky and, when comparing its historical volatility, Gilead Sciences is 7.93 times less risky than Lexaria Bioscience. The stock trades about 0.0 of its potential returns per unit of risk. The Lexaria Bioscience Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  80.00  in Lexaria Bioscience Corp on September 14, 2024 and sell it today you would lose (5.00) from holding Lexaria Bioscience Corp or give up 6.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.48%
Values	Daily Returns

Gilead Sciences  vs.  Lexaria Bioscience Corp

Gilead Sciences

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gilead Sciences are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent essential indicators, Gilead Sciences may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lexaria Bioscience Corp

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Lexaria Bioscience Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Lexaria Bioscience is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Gilead Sciences and Lexaria Bioscience

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

The idea behind Gilead Sciences and Lexaria Bioscience Corp 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.