Correlation Between Scilex Holding and Gilead Sciences

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

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

Diversification Opportunities for Scilex Holding and Gilead Sciences

0.33

Correlation Coefficient

Scilex Holding  Gilead Sciences

Weak diversification

The 3 months correlation between Scilex and Gilead is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Scilex Holding and Gilead Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilead Sciences and Scilex Holding 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 Scilex Holding 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 Scilex Holding i.e., Scilex Holding and Gilead Sciences go up and down completely randomly.

Pair Corralation between Scilex Holding and Gilead Sciences

Assuming the 90 days horizon Scilex Holding is expected to generate 20.52 times more return on investment than Gilead Sciences. However, Scilex Holding is 20.52 times more volatile than Gilead Sciences. It trades about 0.0 of its potential returns per unit of risk. Gilead Sciences is currently generating about -0.03 per unit of risk. 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

Scilex Holding  vs.  Gilead Sciences

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.

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.

Pair Trading with Scilex Holding and Gilead Sciences

The main advantage of trading using opposite Scilex Holding and Gilead Sciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scilex Holding 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 Scilex Holding 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.