Correlation Between Cemepe Investimentos and Gilead Sciences

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

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

Diversification Opportunities for Cemepe Investimentos and Gilead Sciences

0.75

Correlation Coefficient

Cemepe Investimentos  Gilead Sciences

Poor diversification

The 3 months correlation between Cemepe and Gilead is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Cemepe Investimentos SA and Gilead Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilead Sciences and Cemepe Investimentos 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 Cemepe Investimentos 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 Cemepe Investimentos i.e., Cemepe Investimentos and Gilead Sciences go up and down completely randomly.

Pair Corralation between Cemepe Investimentos and Gilead Sciences

Assuming the 90 days trading horizon Cemepe Investimentos is expected to generate 2.08 times less return on investment than Gilead Sciences. In addition to that, Cemepe Investimentos is 1.02 times more volatile than Gilead Sciences. It trades about 0.1 of its total potential returns per unit of risk. Gilead Sciences is currently generating about 0.22 per unit of volatility. If you would invest  22,885  in Gilead Sciences on September 25, 2024 and sell it today you would earn a total of  5,871  from holding Gilead Sciences or generate 25.65% return on investment over 90 days.

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

Cemepe Investimentos SA  vs.  Gilead Sciences

Cemepe Investimentos

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cemepe Investimentos SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Cemepe Investimentos may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Cemepe Investimentos and Gilead Sciences

The main advantage of trading using opposite Cemepe Investimentos and Gilead Sciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cemepe Investimentos 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 Cemepe Investimentos 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.