Correlation Between Gilead Sciences and Lisata Therapeutics

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

Diversification Opportunities for Gilead Sciences and Lisata Therapeutics

0.07

Correlation Coefficient

Gilead Sciences  Lisata Therapeutics

Significant diversification

The 3 months correlation between Gilead and Lisata is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Gilead Sciences and Lisata Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lisata 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 Lisata Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lisata Therapeutics has no effect on the direction of Gilead Sciences i.e., Gilead Sciences and Lisata Therapeutics go up and down completely randomly.

Pair Corralation between Gilead Sciences and Lisata Therapeutics

Given the investment horizon of 90 days Gilead Sciences is expected to generate 0.35 times more return on investment than Lisata Therapeutics. However, Gilead Sciences is 2.89 times less risky than Lisata Therapeutics. It trades about 0.04 of its potential returns per unit of risk. Lisata Therapeutics is currently generating about 0.0 per unit of risk. If you would invest  7,529  in Gilead Sciences on October 24, 2024 and sell it today you would earn a total of  1,690  from holding Gilead Sciences or generate 22.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Gilead Sciences  vs.  Lisata Therapeutics

Gilead Sciences

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gilead Sciences are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Gilead Sciences is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Lisata Therapeutics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lisata Therapeutics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Lisata Therapeutics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gilead Sciences and Lisata Therapeutics

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

The idea behind Gilead Sciences and Lisata 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.