Correlation Between Eli Lilly and Blueprint Medicines

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

Diversification Opportunities for Eli Lilly and Blueprint Medicines

-0.52

Correlation Coefficient

Eli Lilly  Blueprint Medicines

Excellent diversification

The 3 months correlation between Eli and Blueprint is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and Blueprint Medicines Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blueprint Medicines Corp 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 Blueprint Medicines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blueprint Medicines Corp has no effect on the direction of Eli Lilly i.e., Eli Lilly and Blueprint Medicines go up and down completely randomly.

Pair Corralation between Eli Lilly and Blueprint Medicines

Considering the 90-day investment horizon Eli Lilly is expected to generate 1.08 times less return on investment than Blueprint Medicines. But when comparing it to its historical volatility, Eli Lilly and is 1.73 times less risky than Blueprint Medicines. It trades about 0.1 of its potential returns per unit of risk. Blueprint Medicines Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,578  in Blueprint Medicines Corp on August 31, 2024 and sell it today you would earn a total of  5,060  from holding Blueprint Medicines Corp or generate 110.53% 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.  Blueprint Medicines Corp

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 unsteady performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Blueprint Medicines Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blueprint Medicines Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Blueprint Medicines is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Eli Lilly and Blueprint Medicines

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

The idea behind Eli Lilly and and Blueprint Medicines Corp 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.