Correlation Between Eli Lilly and Amgen

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

Diversification Opportunities for Eli Lilly and Amgen

0.51

Correlation Coefficient

Eli Lilly  Amgen

Very weak diversification

The 3 months correlation between Eli and Amgen is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen Inc 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 Amgen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amgen Inc has no effect on the direction of Eli Lilly i.e., Eli Lilly and Amgen go up and down completely randomly.

Pair Corralation between Eli Lilly and Amgen

Assuming the 90 days trading horizon Eli Lilly and is expected to generate 1.34 times more return on investment than Amgen. However, Eli Lilly is 1.34 times more volatile than Amgen Inc. It trades about 0.09 of its potential returns per unit of risk. Amgen Inc is currently generating about 0.02 per unit of risk. If you would invest  683,010  in Eli Lilly and on September 26, 2024 and sell it today you would earn a total of  923,290  from holding Eli Lilly and or generate 135.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Eli Lilly and  vs.  Amgen Inc

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 weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Amgen Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amgen Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Eli Lilly and Amgen

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

The idea behind Eli Lilly and and Amgen 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.