Correlation Between Elanco Animal and ASPEN PHARUNADR

Can any of the company-specific risk be diversified away by investing in both Elanco Animal and ASPEN PHARUNADR 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 ASPEN PHARUNADR 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 ASPEN PHARUNADR 1, you can compare the effects of market volatilities on Elanco Animal and ASPEN PHARUNADR 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 ASPEN PHARUNADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elanco Animal and ASPEN PHARUNADR.

Diversification Opportunities for Elanco Animal and ASPEN PHARUNADR

0.34

Correlation Coefficient

Elanco Animal  ASPEN PHARUNADR

Weak diversification

The 3 months correlation between Elanco and ASPEN is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Elanco Animal Health and ASPEN PHARUNADR 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASPEN PHARUNADR 1 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 ASPEN PHARUNADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASPEN PHARUNADR 1 has no effect on the direction of Elanco Animal i.e., Elanco Animal and ASPEN PHARUNADR go up and down completely randomly.

Pair Corralation between Elanco Animal and ASPEN PHARUNADR

Assuming the 90 days horizon Elanco Animal Health is expected to generate 1.94 times more return on investment than ASPEN PHARUNADR. However, Elanco Animal is 1.94 times more volatile than ASPEN PHARUNADR 1. It trades about 0.0 of its potential returns per unit of risk. ASPEN PHARUNADR 1 is currently generating about -0.12 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 Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Elanco Animal Health  vs.  ASPEN PHARUNADR 1

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.

ASPEN PHARUNADR 1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASPEN PHARUNADR 1 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.

Pair Trading with Elanco Animal and ASPEN PHARUNADR

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

The idea behind Elanco Animal Health and ASPEN PHARUNADR 1 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.