Correlation Between CanSino Biologics and Elanco Animal

Can any of the company-specific risk be diversified away by investing in both CanSino Biologics and Elanco Animal 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 CanSino Biologics and Elanco Animal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CanSino Biologics and Elanco Animal Health, you can compare the effects of market volatilities on CanSino Biologics and Elanco Animal 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 CanSino Biologics with a short position of Elanco Animal. Check out your portfolio center. Please also check ongoing floating volatility patterns of CanSino Biologics and Elanco Animal.

Diversification Opportunities for CanSino Biologics and Elanco Animal

0.03

Correlation Coefficient

CanSino Biologics  Elanco Animal

Significant diversification

The 3 months correlation between CanSino and Elanco is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding CanSino Biologics and Elanco Animal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elanco Animal Health and CanSino Biologics 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 CanSino Biologics are associated (or correlated) with Elanco Animal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elanco Animal Health has no effect on the direction of CanSino Biologics i.e., CanSino Biologics and Elanco Animal go up and down completely randomly.

Pair Corralation between CanSino Biologics and Elanco Animal

Assuming the 90 days horizon CanSino Biologics is expected to under-perform the Elanco Animal. In addition to that, CanSino Biologics is 1.31 times more volatile than Elanco Animal Health. It trades about -0.31 of its total potential returns per unit of risk. Elanco Animal Health is currently generating about -0.17 per unit of volatility. If you would invest  1,190  in Elanco Animal Health on October 12, 2024 and sell it today you would lose (78.00) from holding Elanco Animal Health or give up 6.55% of portfolio value over 90 days.

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

CanSino Biologics  vs.  Elanco Animal Health

CanSino Biologics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CanSino Biologics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CanSino Biologics reported solid returns over the last few months and may actually be approaching a breakup point.

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with CanSino Biologics and Elanco Animal

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

The idea behind CanSino Biologics and Elanco Animal Health 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.