Correlation Between Eli Lilly and Novavax
Can any of the company-specific risk be diversified away by investing in both Eli Lilly and Novavax 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 Novavax 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 Novavax, you can compare the effects of market volatilities on Eli Lilly and Novavax 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 Novavax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eli Lilly and Novavax.
Diversification Opportunities for Eli Lilly and Novavax
Very poor diversification
The 3 months correlation between Eli and Novavax is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and Novavax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novavax 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 Novavax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novavax has no effect on the direction of Eli Lilly i.e., Eli Lilly and Novavax go up and down completely randomly.
Pair Corralation between Eli Lilly and Novavax
Considering the 90-day investment horizon Eli Lilly and is expected to generate 0.37 times more return on investment than Novavax. However, Eli Lilly and is 2.74 times less risky than Novavax. It trades about -0.1 of its potential returns per unit of risk. Novavax is currently generating about -0.08 per unit of risk. If you would invest 90,468 in Eli Lilly and on September 17, 2024 and sell it today you would lose (11,556) from holding Eli Lilly and or give up 12.77% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Eli Lilly and vs. Novavax
Performance |
Timeline |
Eli Lilly |
Novavax |
Eli Lilly and Novavax Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Eli Lilly and Novavax
The main advantage of trading using opposite Eli Lilly and Novavax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eli Lilly position performs unexpectedly, Novavax 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 Novavax will offset losses from the drop in Novavax's long position.Eli Lilly vs. Emergent Biosolutions | Eli Lilly vs. Neurocrine Biosciences | Eli Lilly vs. Teva Pharma Industries | Eli Lilly vs. Haleon plc |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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