Correlation Between JBS SA and Gilead Sciences

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

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

Diversification Opportunities for JBS SA and Gilead Sciences

0.91

Correlation Coefficient

JBS SA  Gilead Sciences

Almost no diversification

The 3 months correlation between JBS and Gilead is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding JBS SA and Gilead Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilead Sciences and JBS SA 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 JBS SA are associated (or correlated) with Gilead Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gilead Sciences has no effect on the direction of JBS SA i.e., JBS SA and Gilead Sciences go up and down completely randomly.

Pair Corralation between JBS SA and Gilead Sciences

Assuming the 90 days trading horizon JBS SA is expected to generate 1.54 times less return on investment than Gilead Sciences. In addition to that, JBS SA is 1.21 times more volatile than Gilead Sciences. It trades about 0.15 of its total potential returns per unit of risk. Gilead Sciences is currently generating about 0.29 per unit of volatility. If you would invest  26,080  in Gilead Sciences on September 25, 2024 and sell it today you would earn a total of  2,676  from holding Gilead Sciences or generate 10.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

JBS SA  vs.  Gilead Sciences

JBS SA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JBS SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, JBS SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Gilead Sciences

Risk-Adjusted Performance

17 of 100

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. Despite somewhat weak essential indicators, Gilead Sciences sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JBS SA and Gilead Sciences

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

The idea behind JBS SA and Gilead Sciences 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.