Correlation Between Eli Lilly and Ameriprise Financial

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

Diversification Opportunities for Eli Lilly and Ameriprise Financial

-0.45

Correlation Coefficient

Eli Lilly  Ameriprise Financial

Very good diversification

The 3 months correlation between Eli and Ameriprise is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and Ameriprise Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriprise Financial 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 Ameriprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriprise Financial has no effect on the direction of Eli Lilly i.e., Eli Lilly and Ameriprise Financial go up and down completely randomly.

Pair Corralation between Eli Lilly and Ameriprise Financial

Assuming the 90 days trading horizon Eli Lilly and is expected to generate 1.98 times more return on investment than Ameriprise Financial. However, Eli Lilly is 1.98 times more volatile than Ameriprise Financial. It trades about 0.12 of its potential returns per unit of risk. Ameriprise Financial is currently generating about -0.28 per unit of risk. If you would invest  1,522,125  in Eli Lilly and on September 25, 2024 and sell it today you would earn a total of  84,175  from holding Eli Lilly and or generate 5.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Eli Lilly and  vs.  Ameriprise Financial

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.

Ameriprise Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ameriprise Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Ameriprise Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eli Lilly and Ameriprise Financial

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

The idea behind Eli Lilly and and Ameriprise Financial 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.