Correlation Between Brookfield Investments and Eli Lilly

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

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

Diversification Opportunities for Brookfield Investments and Eli Lilly

-0.51

Correlation Coefficient

Brookfield Investments  Eli Lilly

Excellent diversification

The 3 months correlation between Brookfield and Eli is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Investments and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and Brookfield Investments 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 Brookfield Investments 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 Brookfield Investments i.e., Brookfield Investments and Eli Lilly go up and down completely randomly.

Pair Corralation between Brookfield Investments and Eli Lilly

Assuming the 90 days trading horizon Brookfield Investments is expected to generate 0.14 times more return on investment than Eli Lilly. However, Brookfield Investments is 7.06 times less risky than Eli Lilly. It trades about 0.0 of its potential returns per unit of risk. Eli Lilly and is currently generating about -0.03 per unit of risk. If you would invest  2,513  in Brookfield Investments on September 29, 2024 and sell it today you would earn a total of  0.00  from holding Brookfield Investments or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	57.14%
Values	Daily Returns

Brookfield Investments  vs.  Eli Lilly and

Brookfield Investments

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Investments are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Brookfield Investments is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the 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 abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Brookfield Investments and Eli Lilly

The main advantage of trading using opposite Brookfield Investments and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Investments 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 Brookfield Investments 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.