Correlation Between Elanco Animal and SIGA Technologies

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

Diversification Opportunities for Elanco Animal and SIGA Technologies

0.72

Correlation Coefficient

Elanco Animal  SIGA Technologies

Poor diversification

The 3 months correlation between Elanco and SIGA is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Elanco Animal Health and SIGA Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIGA Technologies 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 SIGA Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIGA Technologies has no effect on the direction of Elanco Animal i.e., Elanco Animal and SIGA Technologies go up and down completely randomly.

Pair Corralation between Elanco Animal and SIGA Technologies

Given the investment horizon of 90 days Elanco Animal Health is expected to under-perform the SIGA Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Elanco Animal Health is 1.21 times less risky than SIGA Technologies. The stock trades about -0.07 of its potential returns per unit of risk. The SIGA Technologies is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  593.00  in SIGA Technologies on December 27, 2024 and sell it today you would lose (36.00) from holding SIGA Technologies or give up 6.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Elanco Animal Health  vs.  SIGA Technologies

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.

SIGA Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days SIGA Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, SIGA Technologies is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Elanco Animal and SIGA Technologies

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

The idea behind Elanco Animal Health and SIGA Technologies 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.