Correlation Between Eli Lilly and Sparx Technology

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

Diversification Opportunities for Eli Lilly and Sparx Technology

-0.53

Correlation Coefficient

Eli Lilly  Sparx Technology

Excellent diversification

The 3 months correlation between Eli and Sparx is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and Sparx Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparx Technology 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 Sparx Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparx Technology has no effect on the direction of Eli Lilly i.e., Eli Lilly and Sparx Technology go up and down completely randomly.

Pair Corralation between Eli Lilly and Sparx Technology

Assuming the 90 days trading horizon Eli Lilly and is expected to generate 0.49 times more return on investment than Sparx Technology. However, Eli Lilly and is 2.02 times less risky than Sparx Technology. It trades about 0.08 of its potential returns per unit of risk. Sparx Technology is currently generating about 0.02 per unit of risk. If you would invest  2,918  in Eli Lilly and on October 13, 2024 and sell it today you would earn a total of  60.00  from holding Eli Lilly and or generate 2.06% return on investment over 90 days.

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

Eli Lilly and  vs.  Sparx Technology

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 abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Sparx Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sparx Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sparx Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eli Lilly and Sparx Technology

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

The idea behind Eli Lilly and and Sparx Technology 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.