Correlation Between Eli Lilly and Sunshine Biopharma

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

Diversification Opportunities for Eli Lilly and Sunshine Biopharma

0.35

Correlation Coefficient

Eli Lilly  Sunshine Biopharma

Weak diversification

The 3 months correlation between Eli and Sunshine is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and Sunshine Biopharma Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunshine Biopharma 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 Sunshine Biopharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunshine Biopharma has no effect on the direction of Eli Lilly i.e., Eli Lilly and Sunshine Biopharma go up and down completely randomly.

Pair Corralation between Eli Lilly and Sunshine Biopharma

Considering the 90-day investment horizon Eli Lilly is expected to generate 24.54 times less return on investment than Sunshine Biopharma. But when comparing it to its historical volatility, Eli Lilly and is 24.34 times less risky than Sunshine Biopharma. It trades about 0.14 of its potential returns per unit of risk. Sunshine Biopharma Warrant is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Sunshine Biopharma Warrant on November 29, 2024 and sell it today you would earn a total of  10.00  from holding Sunshine Biopharma Warrant or generate 55.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	88.14%
Values	Daily Returns

Eli Lilly and  vs.  Sunshine Biopharma Warrant

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.

Sunshine Biopharma

Risk-Adjusted Performance

Good

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

Pair Trading with Eli Lilly and Sunshine Biopharma

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

The idea behind Eli Lilly and and Sunshine Biopharma Warrant 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.