Correlation Between Elanco Animal and SNDL

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

Diversification Opportunities for Elanco Animal and SNDL

0.71

Correlation Coefficient

Elanco Animal  SNDL

Poor diversification

The 3 months correlation between Elanco and SNDL is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Elanco Animal Health and SNDL Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNDL Inc 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 SNDL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNDL Inc has no effect on the direction of Elanco Animal i.e., Elanco Animal and SNDL go up and down completely randomly.

Pair Corralation between Elanco Animal and SNDL

Given the investment horizon of 90 days Elanco Animal Health is expected to generate 0.79 times more return on investment than SNDL. However, Elanco Animal Health is 1.26 times less risky than SNDL. It trades about -0.05 of its potential returns per unit of risk. SNDL Inc is currently generating about -0.07 per unit of risk. If you would invest  1,163  in Elanco Animal Health on December 20, 2024 and sell it today you would lose (80.00) from holding Elanco Animal Health or give up 6.88% 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.  SNDL Inc

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 very healthy basic indicators, Elanco Animal is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

SNDL Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days SNDL Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Elanco Animal and SNDL

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

The idea behind Elanco Animal Health and SNDL Inc 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.