Correlation Between Eli Lilly and FibroGen

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

Diversification Opportunities for Eli Lilly and FibroGen

-0.06

Correlation Coefficient

Eli Lilly  FibroGen

Good diversification

The 3 months correlation between Eli and FibroGen is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and FibroGen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FibroGen 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 FibroGen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FibroGen has no effect on the direction of Eli Lilly i.e., Eli Lilly and FibroGen go up and down completely randomly.

Pair Corralation between Eli Lilly and FibroGen

Assuming the 90 days trading horizon Eli Lilly and is expected to under-perform the FibroGen. But the stock apears to be less risky and, when comparing its historical volatility, Eli Lilly and is 2.17 times less risky than FibroGen. The stock trades about -0.08 of its potential returns per unit of risk. The FibroGen is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  820.00  in FibroGen on September 23, 2024 and sell it today you would lose (94.00) from holding FibroGen or give up 11.46% of portfolio value over 90 days.

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

Eli Lilly and  vs.  FibroGen

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 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.

FibroGen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FibroGen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, FibroGen is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eli Lilly and FibroGen

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

The idea behind Eli Lilly and and FibroGen 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.