Correlation Between Elanco Animal and Identiv

Can any of the company-specific risk be diversified away by investing in both Elanco Animal and Identiv 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 Identiv 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 Identiv, you can compare the effects of market volatilities on Elanco Animal and Identiv 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 Identiv. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elanco Animal and Identiv.

Diversification Opportunities for Elanco Animal and Identiv

-0.27

Correlation Coefficient

Elanco Animal  Identiv

Very good diversification

The 3 months correlation between Elanco and Identiv is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Elanco Animal Health and Identiv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Identiv 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 Identiv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Identiv has no effect on the direction of Elanco Animal i.e., Elanco Animal and Identiv go up and down completely randomly.

Pair Corralation between Elanco Animal and Identiv

Assuming the 90 days horizon Elanco Animal Health is expected to generate 0.73 times more return on investment than Identiv. However, Elanco Animal Health is 1.37 times less risky than Identiv. It trades about -0.1 of its potential returns per unit of risk. Identiv is currently generating about -0.08 per unit of risk. If you would invest  1,206  in Elanco Animal Health on October 8, 2024 and sell it today you would lose (41.00) from holding Elanco Animal Health or give up 3.4% 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.  Identiv

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 uncertain 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.

Identiv

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Elanco Animal and Identiv

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

The idea behind Elanco Animal Health and Identiv 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.