Correlation Between Brinker International and Eli Lilly

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

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

Diversification Opportunities for Brinker International and Eli Lilly

-0.74

Correlation Coefficient

Brinker International  Eli Lilly

Pay attention - limited upside

The 3 months correlation between Brinker and Eli is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Brinker International and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and Brinker International 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 Brinker International 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 Brinker International i.e., Brinker International and Eli Lilly go up and down completely randomly.

Pair Corralation between Brinker International and Eli Lilly

Assuming the 90 days horizon Brinker International is expected to generate 1.25 times more return on investment than Eli Lilly. However, Brinker International is 1.25 times more volatile than Eli Lilly and. It trades about 0.13 of its potential returns per unit of risk. Eli Lilly and is currently generating about 0.13 per unit of risk. If you would invest  11,800  in Brinker International on September 23, 2024 and sell it today you would earn a total of  900.00  from holding Brinker International or generate 7.63% return on investment over 90 days.

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

Brinker International  vs.  Eli Lilly and

Brinker International

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brinker International are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Brinker International reported solid returns over the last few months and may actually be approaching a breakup point.

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 comparatively stable basic indicators, Eli Lilly is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Brinker International and Eli Lilly

The main advantage of trading using opposite Brinker International and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brinker International 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 Brinker International 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.