Correlation Between Gilead Sciences and Citius Pharmaceuticals

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

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

Diversification Opportunities for Gilead Sciences and Citius Pharmaceuticals

-0.65

Correlation Coefficient

Gilead Sciences  Citius Pharmaceuticals

Excellent diversification

The 3 months correlation between Gilead and Citius is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Gilead Sciences and Citius Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citius Pharmaceuticals 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 Citius Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citius Pharmaceuticals has no effect on the direction of Gilead Sciences i.e., Gilead Sciences and Citius Pharmaceuticals go up and down completely randomly.

Pair Corralation between Gilead Sciences and Citius Pharmaceuticals

Given the investment horizon of 90 days Gilead Sciences is expected to generate 0.26 times more return on investment than Citius Pharmaceuticals. However, Gilead Sciences is 3.8 times less risky than Citius Pharmaceuticals. It trades about 0.04 of its potential returns per unit of risk. Citius Pharmaceuticals is currently generating about -0.08 per unit of risk. If you would invest  7,600  in Gilead Sciences on September 12, 2024 and sell it today you would earn a total of  1,634  from holding Gilead Sciences or generate 21.5% return on investment over 90 days.

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

Gilead Sciences  vs.  Citius Pharmaceuticals

Gilead Sciences

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gilead Sciences are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Gilead Sciences may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Citius Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Citius Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Gilead Sciences and Citius Pharmaceuticals

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

The idea behind Gilead Sciences and Citius Pharmaceuticals 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.