Correlation Between Dupont De and Eli Lilly

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

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

Diversification Opportunities for Dupont De and Eli Lilly

0.45

Correlation Coefficient

Dupont De  Eli Lilly

Very weak diversification

The 3 months correlation between Dupont and Eli is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and Dupont De 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 Dupont De Nemours 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 Dupont De i.e., Dupont De and Eli Lilly go up and down completely randomly.

Pair Corralation between Dupont De and Eli Lilly

Allowing for the 90-day total investment horizon Dupont De is expected to generate 2.19 times less return on investment than Eli Lilly. But when comparing it to its historical volatility, Dupont De Nemours is 1.32 times less risky than Eli Lilly. It trades about 0.02 of its potential returns per unit of risk. Eli Lilly and is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  73,374  in Eli Lilly and on December 19, 2024 and sell it today you would earn a total of  1,596  from holding Eli Lilly and or generate 2.18% return on investment over 90 days.

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

Dupont De Nemours  vs.  Eli Lilly and

Dupont De Nemours

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Eli Lilly

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eli Lilly and are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Eli Lilly is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Dupont De and Eli Lilly

The main advantage of trading using opposite Dupont De and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De 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 Dupont De Nemours 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.