Correlation Between Gilead Sciences and Lumos Pharma

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

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

Diversification Opportunities for Gilead Sciences and Lumos Pharma

0.0

Correlation Coefficient

Gilead Sciences  Lumos Pharma

Pay attention - limited upside

The 3 months correlation between Gilead and Lumos is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Gilead Sciences and Lumos Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumos Pharma 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 Lumos Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumos Pharma has no effect on the direction of Gilead Sciences i.e., Gilead Sciences and Lumos Pharma go up and down completely randomly.

Pair Corralation between Gilead Sciences and Lumos Pharma

If you would invest  9,137  in Gilead Sciences on December 28, 2024 and sell it today you would earn a total of  2,042  from holding Gilead Sciences or generate 22.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Gilead Sciences  vs.  Lumos Pharma

Gilead Sciences

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gilead Sciences are ranked lower than 17 (%) 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.

Lumos Pharma

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lumos Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Lumos Pharma is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Gilead Sciences and Lumos Pharma

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

The idea behind Gilead Sciences and Lumos Pharma 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.