Correlation Between Elanco Animal and INDIVIOR PLC

Can any of the company-specific risk be diversified away by investing in both Elanco Animal and INDIVIOR PLC 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 INDIVIOR PLC 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 INDIVIOR PLC ADR, you can compare the effects of market volatilities on Elanco Animal and INDIVIOR PLC 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 INDIVIOR PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elanco Animal and INDIVIOR PLC.

Diversification Opportunities for Elanco Animal and INDIVIOR PLC

-0.69

Correlation Coefficient

Elanco Animal  INDIVIOR PLC

Excellent diversification

The 3 months correlation between Elanco and INDIVIOR is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Elanco Animal Health and INDIVIOR PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDIVIOR PLC ADR 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 INDIVIOR PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDIVIOR PLC ADR has no effect on the direction of Elanco Animal i.e., Elanco Animal and INDIVIOR PLC go up and down completely randomly.

Pair Corralation between Elanco Animal and INDIVIOR PLC

If you would invest  2,185  in INDIVIOR PLC ADR on September 2, 2024 and sell it today you would earn a total of  0.00  from holding INDIVIOR PLC ADR or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

Elanco Animal Health  vs.  INDIVIOR PLC ADR

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. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

INDIVIOR PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INDIVIOR PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, INDIVIOR PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Elanco Animal and INDIVIOR PLC

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

The idea behind Elanco Animal Health and INDIVIOR PLC ADR 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.