Correlation Between Elanco Animal and ALRN Old

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

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

Diversification Opportunities for Elanco Animal and ALRN Old

0.0

Correlation Coefficient

Elanco Animal  ALRN Old

Pay attention - limited upside

The 3 months correlation between Elanco and ALRN is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Elanco Animal Health and ALRN Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALRN Old and Elanco Animal 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 Elanco Animal Health are associated (or correlated) with ALRN Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALRN Old has no effect on the direction of Elanco Animal i.e., Elanco Animal and ALRN Old go up and down completely randomly.

Pair Corralation between Elanco Animal and ALRN Old

If you would invest  1,101  in Elanco Animal Health on November 21, 2024 and sell it today you would earn a total of  21.50  from holding Elanco Animal Health or generate 1.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Elanco Animal Health  vs.  ALRN Old

Elanco Animal Health

Risk-Adjusted Performance

Very Weak

Over the last 90 days Elanco Animal Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

ALRN Old

Risk-Adjusted Performance

Very Weak

Over the last 90 days ALRN Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, ALRN Old is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Elanco Animal and ALRN Old

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

The idea behind Elanco Animal Health and ALRN Old 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.