Correlation Between Gilead Sciences and Burning Rock

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

By analyzing existing cross correlation between Gilead Sciences and Burning Rock Biotech, you can compare the effects of market volatilities on Gilead Sciences and Burning Rock 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 Burning Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gilead Sciences and Burning Rock.

Diversification Opportunities for Gilead Sciences and Burning Rock

-0.2

Correlation Coefficient

Gilead Sciences  Burning Rock

Good diversification

The 3 months correlation between Gilead and Burning is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Gilead Sciences and Burning Rock Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burning Rock Biotech 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 Burning Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burning Rock Biotech has no effect on the direction of Gilead Sciences i.e., Gilead Sciences and Burning Rock go up and down completely randomly.

Pair Corralation between Gilead Sciences and Burning Rock

Given the investment horizon of 90 days Gilead Sciences is expected to generate 2.79 times less return on investment than Burning Rock. But when comparing it to its historical volatility, Gilead Sciences is 6.28 times less risky than Burning Rock. It trades about 0.18 of its potential returns per unit of risk. Burning Rock Biotech is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  500.00  in Burning Rock Biotech on September 2, 2024 and sell it today you would earn a total of  116.00  from holding Burning Rock Biotech or generate 23.2% return on investment over 90 days.

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

Gilead Sciences  vs.  Burning Rock Biotech

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.

Burning Rock Biotech

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Burning Rock Biotech are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Burning Rock reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gilead Sciences and Burning Rock

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

The idea behind Gilead Sciences and Burning Rock Biotech 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.