Correlation Between GlaxoSmithKline PLC and Gilead Sciences

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC 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 GlaxoSmithKline PLC and Gilead Sciences into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GlaxoSmithKline PLC ADR and Gilead Sciences, you can compare the effects of market volatilities on GlaxoSmithKline PLC 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 GlaxoSmithKline PLC with a short position of Gilead Sciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Gilead Sciences.

Diversification Opportunities for GlaxoSmithKline PLC and Gilead Sciences

-0.73
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between GlaxoSmithKline and Gilead is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Gilead Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilead Sciences and GlaxoSmithKline PLC 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 GlaxoSmithKline PLC ADR 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 GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Gilead Sciences go up and down completely randomly.

Pair Corralation between GlaxoSmithKline PLC and Gilead Sciences

Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to generate 0.78 times more return on investment than Gilead Sciences. However, GlaxoSmithKline PLC ADR is 1.29 times less risky than Gilead Sciences. It trades about 0.14 of its potential returns per unit of risk. Gilead Sciences is currently generating about 0.0 per unit of risk. If you would invest  3,445  in GlaxoSmithKline PLC ADR on December 29, 2023 and sell it today you would earn a total of  842.00  from holding GlaxoSmithKline PLC ADR or generate 24.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

GlaxoSmithKline PLC ADR  vs.  Gilead Sciences

 Performance 
       Timeline  
GlaxoSmithKline PLC ADR 

Risk-Adjusted Performance

20 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in GlaxoSmithKline PLC ADR are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, GlaxoSmithKline PLC disclosed solid returns over the last few months and may actually be approaching a breakup point.
Gilead Sciences 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Gilead Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

GlaxoSmithKline PLC and Gilead Sciences Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GlaxoSmithKline PLC and Gilead Sciences

The main advantage of trading using opposite GlaxoSmithKline PLC and Gilead Sciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC 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 GlaxoSmithKline PLC ADR 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.
Check out your portfolio center.
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

Other Complementary Tools

Bonds Directory
Find actively traded corporate debentures issued by US companies
Portfolio Rebalancing
Analyze risk-adjusted returns against different time horizons to find asset-allocation targets
Sign In To Macroaxis
Sign in to explore Macroaxis' wealth optimization platform and fintech modules
Portfolio Holdings
Check your current holdings and cash postion to detemine if your portfolio needs rebalancing
Price Ceiling Movement
Calculate and plot Price Ceiling Movement for different equity instruments
Idea Breakdown
Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes
Equity Search
Search for actively traded equities including funds and ETFs from over 30 global markets
Bollinger Bands
Use Bollinger Bands indicator to analyze target price for a given investing horizon