Correlation Between Amgen and Gilead Sciences

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

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

Diversification Opportunities for Amgen and Gilead Sciences

-0.55

Correlation Coefficient

Amgen  Gilead Sciences

Excellent diversification

The 3 months correlation between Amgen and Gilead is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and Gilead Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilead Sciences and Amgen 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 Amgen Inc 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 Amgen i.e., Amgen and Gilead Sciences go up and down completely randomly.

Pair Corralation between Amgen and Gilead Sciences

Given the investment horizon of 90 days Amgen Inc is expected to under-perform the Gilead Sciences. In addition to that, Amgen is 1.13 times more volatile than Gilead Sciences. It trades about -0.22 of its total potential returns per unit of risk. Gilead Sciences is currently generating about 0.09 per unit of volatility. If you would invest  8,951  in Gilead Sciences on September 2, 2024 and sell it today you would earn a total of  307.00  from holding Gilead Sciences or generate 3.43% return on investment over 90 days.

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

Amgen Inc  vs.  Gilead Sciences

Amgen Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amgen Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Gilead Sciences

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gilead Sciences are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating essential indicators, Gilead Sciences exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amgen and Gilead Sciences

The main advantage of trading using opposite Amgen and Gilead Sciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amgen 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 Amgen Inc 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.