Correlation Between MeVis Medical and Eli Lilly

Can any of the company-specific risk be diversified away by investing in both MeVis Medical and Eli Lilly 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 MeVis Medical and Eli Lilly into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MeVis Medical Solutions and Eli Lilly and, you can compare the effects of market volatilities on MeVis Medical and Eli Lilly 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 MeVis Medical with a short position of Eli Lilly. Check out your portfolio center. Please also check ongoing floating volatility patterns of MeVis Medical and Eli Lilly.

Diversification Opportunities for MeVis Medical and Eli Lilly

-0.4

Correlation Coefficient

MeVis Medical  Eli Lilly

Very good diversification

The 3 months correlation between MeVis and Eli is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding MeVis Medical Solutions and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and MeVis Medical 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 MeVis Medical Solutions are associated (or correlated) with Eli Lilly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eli Lilly has no effect on the direction of MeVis Medical i.e., MeVis Medical and Eli Lilly go up and down completely randomly.

Pair Corralation between MeVis Medical and Eli Lilly

Assuming the 90 days trading horizon MeVis Medical is expected to generate 3.24 times less return on investment than Eli Lilly. But when comparing it to its historical volatility, MeVis Medical Solutions is 1.64 times less risky than Eli Lilly. It trades about 0.03 of its potential returns per unit of risk. Eli Lilly and is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  55,112  in Eli Lilly and on October 3, 2024 and sell it today you would earn a total of  19,698  from holding Eli Lilly and or generate 35.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

MeVis Medical Solutions  vs.  Eli Lilly and

MeVis Medical Solutions

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MeVis Medical Solutions are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, MeVis Medical is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Eli Lilly

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eli Lilly and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Eli Lilly is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with MeVis Medical and Eli Lilly

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

The idea behind MeVis Medical Solutions and Eli Lilly and 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.