Correlation Between Elanco Animal and Hisamitsu Pharmaceutical

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

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

Diversification Opportunities for Elanco Animal and Hisamitsu Pharmaceutical

-0.37

Correlation Coefficient

Elanco Animal  Hisamitsu Pharmaceutical

Very good diversification

The 3 months correlation between Elanco and Hisamitsu is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Elanco Animal Health and Hisamitsu Pharmaceutical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hisamitsu Pharmaceutical and Elanco Animal 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 Elanco Animal Health are associated (or correlated) with Hisamitsu Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hisamitsu Pharmaceutical has no effect on the direction of Elanco Animal i.e., Elanco Animal and Hisamitsu Pharmaceutical go up and down completely randomly.

Pair Corralation between Elanco Animal and Hisamitsu Pharmaceutical

Assuming the 90 days horizon Elanco Animal Health is expected to generate 2.7 times more return on investment than Hisamitsu Pharmaceutical. However, Elanco Animal is 2.7 times more volatile than Hisamitsu Pharmaceutical Co. It trades about 0.0 of its potential returns per unit of risk. Hisamitsu Pharmaceutical Co is currently generating about -0.03 per unit of risk. If you would invest  1,152  in Elanco Animal Health on September 24, 2024 and sell it today you would lose (24.00) from holding Elanco Animal Health or give up 2.08% of portfolio value over 90 days.

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

Elanco Animal Health  vs.  Hisamitsu Pharmaceutical Co

Elanco Animal Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elanco Animal Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Hisamitsu Pharmaceutical

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hisamitsu Pharmaceutical Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Hisamitsu Pharmaceutical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Elanco Animal and Hisamitsu Pharmaceutical

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

The idea behind Elanco Animal Health and Hisamitsu 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.