Correlation Between Gilead Sciences and MAIA Biotechnology

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

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

Diversification Opportunities for Gilead Sciences and MAIA Biotechnology

-0.41

Correlation Coefficient

Gilead Sciences  MAIA Biotechnology

Very good diversification

The 3 months correlation between Gilead and MAIA is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Gilead Sciences and MAIA Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAIA Biotechnology 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 MAIA Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAIA Biotechnology has no effect on the direction of Gilead Sciences i.e., Gilead Sciences and MAIA Biotechnology go up and down completely randomly.

Pair Corralation between Gilead Sciences and MAIA Biotechnology

Given the investment horizon of 90 days Gilead Sciences is expected to generate 0.29 times more return on investment than MAIA Biotechnology. However, Gilead Sciences is 3.46 times less risky than MAIA Biotechnology. It trades about 0.21 of its potential returns per unit of risk. MAIA Biotechnology is currently generating about -0.14 per unit of risk. If you would invest  8,766  in Gilead Sciences on September 16, 2024 and sell it today you would earn a total of  420.00  from holding Gilead Sciences or generate 4.79% return on investment over 90 days.

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

Gilead Sciences  vs.  MAIA Biotechnology

Gilead Sciences

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gilead Sciences are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent essential indicators, Gilead Sciences may actually be approaching a critical reversion point that can send shares even higher in January 2025.

MAIA Biotechnology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MAIA Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Gilead Sciences and MAIA Biotechnology

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

The idea behind Gilead Sciences and MAIA Biotechnology 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.