Correlation Between Gilead Sciences and Scilex Holding

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

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

Diversification Opportunities for Gilead Sciences and Scilex Holding

0.33

Correlation Coefficient

Gilead Sciences  Scilex Holding

Weak diversification

The 3 months correlation between Gilead and Scilex is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Gilead Sciences and Scilex Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scilex Holding 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 Scilex Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scilex Holding has no effect on the direction of Gilead Sciences i.e., Gilead Sciences and Scilex Holding go up and down completely randomly.

Pair Corralation between Gilead Sciences and Scilex Holding

Given the investment horizon of 90 days Gilead Sciences is expected to under-perform the Scilex Holding. But the stock apears to be less risky and, when comparing its historical volatility, Gilead Sciences is 20.52 times less risky than Scilex Holding. The stock trades about -0.03 of its potential returns per unit of risk. The Scilex Holding is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Scilex Holding on October 10, 2024 and sell it today you would lose (10.00) from holding Scilex Holding or give up 33.33% of portfolio value over 90 days.

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

Gilead Sciences  vs.  Scilex Holding

Gilead Sciences

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gilead Sciences are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating essential indicators, Gilead Sciences may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Scilex Holding

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Scilex Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Scilex Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gilead Sciences and Scilex Holding

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

The idea behind Gilead Sciences and Scilex Holding 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.