Correlation Between Eli Lilly and Incannex Healthcare

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

Diversification Opportunities for Eli Lilly and Incannex Healthcare

-0.43

Correlation Coefficient

Eli Lilly  Incannex Healthcare

Very good diversification

The 3 months correlation between Eli and Incannex is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and Incannex Healthcare Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Incannex Healthcare 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 Incannex Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Incannex Healthcare has no effect on the direction of Eli Lilly i.e., Eli Lilly and Incannex Healthcare go up and down completely randomly.

Pair Corralation between Eli Lilly and Incannex Healthcare

Considering the 90-day investment horizon Eli Lilly and is expected to generate 0.26 times more return on investment than Incannex Healthcare. However, Eli Lilly and is 3.88 times less risky than Incannex Healthcare. It trades about 0.43 of its potential returns per unit of risk. Incannex Healthcare Ltd is currently generating about -0.12 per unit of risk. If you would invest  80,361  in Eli Lilly and on November 29, 2024 and sell it today you would earn a total of  11,340  from holding Eli Lilly and or generate 14.11% 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.  Incannex Healthcare Ltd

Eli Lilly

Risk-Adjusted Performance

Good

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.

Incannex Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Incannex Healthcare Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical indicators remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Eli Lilly and Incannex Healthcare

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

The idea behind Eli Lilly and and Incannex Healthcare Ltd 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.