Correlation Between Elanco Animal and BC Bud
Can any of the company-specific risk be diversified away by investing in both Elanco Animal and BC Bud 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 BC Bud 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 The BC Bud, you can compare the effects of market volatilities on Elanco Animal and BC Bud 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 BC Bud. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elanco Animal and BC Bud.
Diversification Opportunities for Elanco Animal and BC Bud
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Elanco and BCBCF is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Elanco Animal Health and The BC Bud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BC Bud 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 BC Bud. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BC Bud has no effect on the direction of Elanco Animal i.e., Elanco Animal and BC Bud go up and down completely randomly.
Pair Corralation between Elanco Animal and BC Bud
Given the investment horizon of 90 days Elanco Animal is expected to generate 21.6 times less return on investment than BC Bud. But when comparing it to its historical volatility, Elanco Animal Health is 6.76 times less risky than BC Bud. It trades about 0.06 of its potential returns per unit of risk. The BC Bud is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 6.63 in The BC Bud on October 23, 2024 and sell it today you would earn a total of 1.96 from holding The BC Bud or generate 29.56% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Elanco Animal Health vs. The BC Bud
Performance |
Timeline |
Elanco Animal Health |
BC Bud |
Elanco Animal and BC Bud Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Elanco Animal and BC Bud
The main advantage of trading using opposite Elanco Animal and BC Bud positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elanco Animal position performs unexpectedly, BC Bud 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 BC Bud will offset losses from the drop in BC Bud's long position.Elanco Animal vs. Viatris | Elanco Animal vs. Lantheus Holdings | Elanco Animal vs. Haleon plc | Elanco Animal vs. Phibro Animal Health |
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Check out your portfolio center.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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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