Correlation Between Alfa Financial and Eli Lilly

Can any of the company-specific risk be diversified away by investing in both Alfa Financial and Eli Lilly 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 Alfa Financial and Eli Lilly into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alfa Financial Software and Eli Lilly and, you can compare the effects of market volatilities on Alfa Financial and Eli Lilly 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 Alfa Financial with a short position of Eli Lilly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfa Financial and Eli Lilly.

Diversification Opportunities for Alfa Financial and Eli Lilly

0.1

Correlation Coefficient

Alfa Financial  Eli Lilly

Average diversification

The 3 months correlation between Alfa and Eli is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Financial Software and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and Alfa Financial 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 Alfa Financial Software are associated (or correlated) with Eli Lilly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eli Lilly has no effect on the direction of Alfa Financial i.e., Alfa Financial and Eli Lilly go up and down completely randomly.

Pair Corralation between Alfa Financial and Eli Lilly

Assuming the 90 days trading horizon Alfa Financial Software is expected to generate 0.75 times more return on investment than Eli Lilly. However, Alfa Financial Software is 1.33 times less risky than Eli Lilly. It trades about -0.07 of its potential returns per unit of risk. Eli Lilly and is currently generating about -0.07 per unit of risk. If you would invest  250.00  in Alfa Financial Software on October 26, 2024 and sell it today you would lose (22.00) from holding Alfa Financial Software or give up 8.8% of portfolio value over 90 days.

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

Alfa Financial Software  vs.  Eli Lilly and

Alfa Financial Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alfa Financial Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Eli Lilly

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eli Lilly and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Alfa Financial and Eli Lilly

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

The idea behind Alfa Financial Software and Eli Lilly and 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.