Correlation Between Eli Lilly and Illumina

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

Diversification Opportunities for Eli Lilly and Illumina

-0.75

Correlation Coefficient

Eli Lilly  Illumina

Pay attention - limited upside

The 3 months correlation between Eli and Illumina is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and Illumina in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Illumina 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 Illumina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Illumina has no effect on the direction of Eli Lilly i.e., Eli Lilly and Illumina go up and down completely randomly.

Pair Corralation between Eli Lilly and Illumina

Considering the 90-day investment horizon Eli Lilly and is expected to generate 0.75 times more return on investment than Illumina. However, Eli Lilly and is 1.34 times less risky than Illumina. It trades about 0.06 of its potential returns per unit of risk. Illumina is currently generating about -0.28 per unit of risk. If you would invest  77,251  in Eli Lilly and on December 28, 2024 and sell it today you would earn a total of  4,916  from holding Eli Lilly and or generate 6.36% 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.  Illumina

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 4 (%) 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.

Illumina

Risk-Adjusted Performance

Very Weak

Over the last 90 days Illumina has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Eli Lilly and Illumina

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

The idea behind Eli Lilly and and Illumina 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.