Correlation Between FARM 51 and Eli Lilly

Can any of the company-specific risk be diversified away by investing in both FARM 51 and Eli Lilly 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 FARM 51 and Eli Lilly into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FARM 51 GROUP and Eli Lilly and, you can compare the effects of market volatilities on FARM 51 and Eli Lilly 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 FARM 51 with a short position of Eli Lilly. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARM 51 and Eli Lilly.

Diversification Opportunities for FARM 51 and Eli Lilly

0.43

Correlation Coefficient

FARM 51  Eli Lilly

Very weak diversification

The 3 months correlation between FARM and Eli is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding FARM 51 GROUP and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and FARM 51 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 FARM 51 GROUP are associated (or correlated) with Eli Lilly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eli Lilly has no effect on the direction of FARM 51 i.e., FARM 51 and Eli Lilly go up and down completely randomly.

Pair Corralation between FARM 51 and Eli Lilly

Assuming the 90 days horizon FARM 51 GROUP is expected to generate 0.88 times more return on investment than Eli Lilly. However, FARM 51 GROUP is 1.14 times less risky than Eli Lilly. It trades about 0.0 of its potential returns per unit of risk. Eli Lilly and is currently generating about -0.07 per unit of risk. If you would invest  313.00  in FARM 51 GROUP on October 25, 2024 and sell it today you would lose (6.00) from holding FARM 51 GROUP or give up 1.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

FARM 51 GROUP  vs.  Eli Lilly and

FARM 51 GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FARM 51 GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, FARM 51 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Eli Lilly

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eli Lilly and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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.

Pair Trading with FARM 51 and Eli Lilly

The main advantage of trading using opposite FARM 51 and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FARM 51 position performs unexpectedly, Eli Lilly 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 Eli Lilly will offset losses from the drop in Eli Lilly's long position.

The idea behind FARM 51 GROUP and Eli Lilly and 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.