Correlation Between Eli Lilly and Bristol Myers

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

Diversification Opportunities for Eli Lilly and Bristol Myers

0.28

Correlation Coefficient

Eli Lilly  Bristol Myers

Modest diversification

The 3 months correlation between Eli and Bristol is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and Bristol Myers Squibb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bristol Myers Squibb 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 Bristol Myers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bristol Myers Squibb has no effect on the direction of Eli Lilly i.e., Eli Lilly and Bristol Myers go up and down completely randomly.

Pair Corralation between Eli Lilly and Bristol Myers

Considering the 90-day investment horizon Eli Lilly and is expected to generate 1.25 times more return on investment than Bristol Myers. However, Eli Lilly is 1.25 times more volatile than Bristol Myers Squibb. It trades about 0.05 of its potential returns per unit of risk. Bristol Myers Squibb is currently generating about 0.04 per unit of risk. If you would invest  78,182  in Eli Lilly and on December 27, 2024 and sell it today you would earn a total of  3,985  from holding Eli Lilly and or generate 5.1% return on investment over 90 days.

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

Eli Lilly and  vs.  Bristol Myers Squibb

Eli Lilly

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eli Lilly and are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, Eli Lilly may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Bristol Myers Squibb

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bristol Myers Squibb are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, Bristol Myers is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eli Lilly and Bristol Myers

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

The idea behind Eli Lilly and and Bristol Myers Squibb 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.