Correlation Between Elanco Animal and Orexo AB

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

Diversification Opportunities for Elanco Animal and Orexo AB

0.0

Correlation Coefficient

Elanco Animal  Orexo AB

Pay attention - limited upside

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

Pair Corralation between Elanco Animal and Orexo AB

If you would invest  108.00  in Orexo AB on December 28, 2024 and sell it today you would earn a total of  0.00  from holding Orexo AB or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Elanco Animal Health  vs.  Orexo AB

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 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.

Orexo AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Orexo AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Orexo AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Elanco Animal and Orexo AB

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

The idea behind Elanco Animal Health and Orexo AB 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.