Correlation Between Gilead Sciences and Ono Pharmaceutical

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

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

Diversification Opportunities for Gilead Sciences and Ono Pharmaceutical

-0.17

Correlation Coefficient

Gilead Sciences  Ono Pharmaceutical

Good diversification

The 3 months correlation between Gilead and Ono is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Gilead Sciences and Ono Pharmaceutical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ono Pharmaceutical and Gilead Sciences 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 Gilead Sciences are associated (or correlated) with Ono Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ono Pharmaceutical has no effect on the direction of Gilead Sciences i.e., Gilead Sciences and Ono Pharmaceutical go up and down completely randomly.

Pair Corralation between Gilead Sciences and Ono Pharmaceutical

Given the investment horizon of 90 days Gilead Sciences is expected to generate 1.07 times more return on investment than Ono Pharmaceutical. However, Gilead Sciences is 1.07 times more volatile than Ono Pharmaceutical Co. It trades about -0.19 of its potential returns per unit of risk. Ono Pharmaceutical Co is currently generating about -0.29 per unit of risk. If you would invest  6,754  in Gilead Sciences on March 12, 2024 and sell it today you would lose (284.00) from holding Gilead Sciences or give up 4.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	40.0%
Values	Daily Returns

Gilead Sciences  vs.  Ono Pharmaceutical Co

Gilead Sciences

Risk-Adjusted Performance

0 of 100

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 unsteady performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in July 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Ono Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ono Pharmaceutical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Gilead Sciences and Ono Pharmaceutical

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

The idea behind Gilead Sciences and Ono Pharmaceutical Co 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.