Correlation Between Eli Lilly and Genworth Financial

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

Diversification Opportunities for Eli Lilly and Genworth Financial

0.0

Correlation Coefficient

Eli Lilly  Genworth Financial

Pay attention - limited upside

The 3 months correlation between Eli and Genworth is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and Genworth Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genworth 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 Genworth Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genworth Financial has no effect on the direction of Eli Lilly i.e., Eli Lilly and Genworth Financial go up and down completely randomly.

Pair Corralation between Eli Lilly and Genworth Financial

Assuming the 90 days trading horizon Eli Lilly and is expected to generate 2.47 times more return on investment than Genworth Financial. However, Eli Lilly is 2.47 times more volatile than Genworth Financial. It trades about 0.09 of its potential returns per unit of risk. Genworth Financial is currently generating about 0.01 per unit of risk. If you would invest  663,896  in Eli Lilly and on October 4, 2024 and sell it today you would earn a total of  936,717  from holding Eli Lilly and or generate 141.09% return on investment over 90 days.

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

Eli Lilly and  vs.  Genworth 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 fairly strong basic indicators, Eli Lilly is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Genworth Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genworth Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Genworth Financial 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 Genworth Financial

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

The idea behind Eli Lilly and and Genworth 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.