Correlation Between Eli Lilly and C4 Therapeutics

Can any of the company-specific risk be diversified away by investing in both Eli Lilly and C4 Therapeutics 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 C4 Therapeutics 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 C4 Therapeutics, you can compare the effects of market volatilities on Eli Lilly and C4 Therapeutics 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 C4 Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eli Lilly and C4 Therapeutics.

Diversification Opportunities for Eli Lilly and C4 Therapeutics

-0.68

Correlation Coefficient

Eli Lilly  C4 Therapeutics

Excellent diversification

The 3 months correlation between Eli and CCCC is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and C4 Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on C4 Therapeutics 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 C4 Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of C4 Therapeutics has no effect on the direction of Eli Lilly i.e., Eli Lilly and C4 Therapeutics go up and down completely randomly.

Pair Corralation between Eli Lilly and C4 Therapeutics

Considering the 90-day investment horizon Eli Lilly and is expected to generate 0.4 times more return on investment than C4 Therapeutics. However, Eli Lilly and is 2.52 times less risky than C4 Therapeutics. It trades about 0.14 of its potential returns per unit of risk. C4 Therapeutics is currently generating about -0.18 per unit of risk. If you would invest  79,398  in Eli Lilly and on November 29, 2024 and sell it today you would earn a total of  12,103  from holding Eli Lilly and or generate 15.24% return on investment over 90 days.

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

Eli Lilly and  vs.  C4 Therapeutics

Eli Lilly

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eli Lilly and are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly sluggish essential indicators, Eli Lilly showed solid returns over the last few months and may actually be approaching a breakup point.

C4 Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days C4 Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Eli Lilly and C4 Therapeutics

The main advantage of trading using opposite Eli Lilly and C4 Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eli Lilly position performs unexpectedly, C4 Therapeutics 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 C4 Therapeutics will offset losses from the drop in C4 Therapeutics' long position.

The idea behind Eli Lilly and and C4 Therapeutics 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.