Correlation Between GW Pharmaceuticals and Gilead Sciences

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

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

Diversification Opportunities for GW Pharmaceuticals and Gilead Sciences

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Correlation Coefficient

GW Pharmaceuticals  Gilead Sciences

Pay attention - limited upside

The 3 months correlation between GWPH and Gilead is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding GW Pharmaceuticals Plc and Gilead Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilead Sciences and GW Pharmaceuticals 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 GW Pharmaceuticals Plc 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 GW Pharmaceuticals i.e., GW Pharmaceuticals and Gilead Sciences go up and down completely randomly.

Pair Corralation between GW Pharmaceuticals and Gilead Sciences

If you would invest (100.00) in GW Pharmaceuticals Plc on January 26, 2024 and sell it today you would earn a total of  100.00  from holding GW Pharmaceuticals Plc or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

GW Pharmaceuticals Plc  vs.  Gilead Sciences

GW Pharmaceuticals Plc

Risk-Adjusted Performance

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Very Weak

Over the last 90 days GW Pharmaceuticals Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, GW Pharmaceuticals is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Gilead Sciences

Risk-Adjusted Performance

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

Pair Trading with GW Pharmaceuticals and Gilead Sciences

The main advantage of trading using opposite GW Pharmaceuticals and Gilead Sciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GW Pharmaceuticals 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 GW Pharmaceuticals Plc 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.