Correlation Between CAREER EDUCATION and Eli Lilly

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Can any of the company-specific risk be diversified away by investing in both CAREER EDUCATION 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 CAREER EDUCATION and Eli Lilly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CAREER EDUCATION and Eli Lilly and, you can compare the effects of market volatilities on CAREER EDUCATION 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 CAREER EDUCATION with a short position of Eli Lilly. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAREER EDUCATION and Eli Lilly.

Diversification Opportunities for CAREER EDUCATION and Eli Lilly

-0.63
  Correlation Coefficient

Excellent diversification

The 3 months correlation between CAREER and Eli is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding CAREER EDUCATION and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and CAREER EDUCATION 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 CAREER EDUCATION 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 CAREER EDUCATION i.e., CAREER EDUCATION and Eli Lilly go up and down completely randomly.

Pair Corralation between CAREER EDUCATION and Eli Lilly

Assuming the 90 days trading horizon CAREER EDUCATION is expected to generate 1.16 times more return on investment than Eli Lilly. However, CAREER EDUCATION is 1.16 times more volatile than Eli Lilly and. It trades about 0.18 of its potential returns per unit of risk. Eli Lilly and is currently generating about -0.04 per unit of risk. If you would invest  1,940  in CAREER EDUCATION on October 5, 2024 and sell it today you would earn a total of  600.00  from holding CAREER EDUCATION or generate 30.93% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy98.33%
ValuesDaily Returns

CAREER EDUCATION  vs.  Eli Lilly and

 Performance 
       Timeline  
CAREER EDUCATION 

Risk-Adjusted Performance

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Weak
 
Strong
Good
Over the last 90 days CAREER EDUCATION has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather uncertain basic indicators, CAREER EDUCATION exhibited solid returns over the last few months and may actually be approaching a breakup point.
Eli Lilly 

Risk-Adjusted Performance

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Weak
 
Strong
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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

CAREER EDUCATION and Eli Lilly Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CAREER EDUCATION and Eli Lilly

The main advantage of trading using opposite CAREER EDUCATION and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAREER EDUCATION 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 CAREER EDUCATION 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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