Correlation Between Elanco Animal and Shuttle Pharmaceuticals

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

Diversification Opportunities for Elanco Animal and Shuttle Pharmaceuticals

0.29

Correlation Coefficient

Elanco Animal  Shuttle Pharmaceuticals

Modest diversification

The 3 months correlation between Elanco and Shuttle is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Elanco Animal Health and Shuttle Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shuttle Pharmaceuticals 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 Shuttle Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shuttle Pharmaceuticals has no effect on the direction of Elanco Animal i.e., Elanco Animal and Shuttle Pharmaceuticals go up and down completely randomly.

Pair Corralation between Elanco Animal and Shuttle Pharmaceuticals

Given the investment horizon of 90 days Elanco Animal Health is expected to under-perform the Shuttle Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Elanco Animal Health is 3.35 times less risky than Shuttle Pharmaceuticals. The stock trades about -0.13 of its potential returns per unit of risk. The Shuttle Pharmaceuticals is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  78.00  in Shuttle Pharmaceuticals on October 8, 2024 and sell it today you would earn a total of  15.00  from holding Shuttle Pharmaceuticals or generate 19.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Elanco Animal Health  vs.  Shuttle Pharmaceuticals

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 uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Shuttle Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shuttle Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Shuttle Pharmaceuticals is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Elanco Animal and Shuttle Pharmaceuticals

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

The idea behind Elanco Animal Health and Shuttle Pharmaceuticals 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.