Correlation Between Eli Lilly and FEMALE HEALTH

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

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

Diversification Opportunities for Eli Lilly and FEMALE HEALTH

0.81

Correlation Coefficient

Eli Lilly  FEMALE HEALTH

Very poor diversification

The 3 months correlation between Eli and FEMALE is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and FEMALE HEALTH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FEMALE HEALTH and Eli Lilly 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 Eli Lilly and are associated (or correlated) with FEMALE HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FEMALE HEALTH has no effect on the direction of Eli Lilly i.e., Eli Lilly and FEMALE HEALTH go up and down completely randomly.

Pair Corralation between Eli Lilly and FEMALE HEALTH

Assuming the 90 days trading horizon Eli Lilly is expected to generate 14.72 times less return on investment than FEMALE HEALTH. But when comparing it to its historical volatility, Eli Lilly and is 4.38 times less risky than FEMALE HEALTH. It trades about 0.03 of its potential returns per unit of risk. FEMALE HEALTH is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  65.00  in FEMALE HEALTH on October 11, 2024 and sell it today you would earn a total of  4.00  from holding FEMALE HEALTH or generate 6.15% return on investment over 90 days.

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

Eli Lilly and  vs.  FEMALE HEALTH

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 stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

FEMALE HEALTH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FEMALE HEALTH has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, FEMALE HEALTH is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Eli Lilly and FEMALE HEALTH

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

The idea behind Eli Lilly and and FEMALE HEALTH 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.