Correlation Between Eli Lilly and Chugai Pharmaceutical

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

Diversification Opportunities for Eli Lilly and Chugai Pharmaceutical

0.83

Correlation Coefficient

Eli Lilly  Chugai Pharmaceutical

Very poor diversification

The 3 months correlation between Eli and Chugai is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and Chugai Pharmaceutical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chugai Pharmaceutical 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 Chugai Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chugai Pharmaceutical has no effect on the direction of Eli Lilly i.e., Eli Lilly and Chugai Pharmaceutical go up and down completely randomly.

Pair Corralation between Eli Lilly and Chugai Pharmaceutical

Considering the 90-day investment horizon Eli Lilly is expected to generate 1.03 times less return on investment than Chugai Pharmaceutical. But when comparing it to its historical volatility, Eli Lilly and is 1.17 times less risky than Chugai Pharmaceutical. It trades about 0.07 of its potential returns per unit of risk. Chugai Pharmaceutical Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,195  in Chugai Pharmaceutical Co on December 26, 2024 and sell it today you would earn a total of  161.00  from holding Chugai Pharmaceutical Co or generate 7.33% return on investment over 90 days.

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

Eli Lilly and  vs.  Chugai Pharmaceutical Co

Eli Lilly

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eli Lilly and are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly sluggish essential indicators, Eli Lilly may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Chugai Pharmaceutical

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chugai Pharmaceutical Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Chugai Pharmaceutical may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Eli Lilly and Chugai Pharmaceutical

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

The idea behind Eli Lilly and and Chugai Pharmaceutical Co 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.