Correlation Between Manulife Financial and Eli Lilly

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Can any of the company-specific risk be diversified away by investing in both Manulife Financial 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 Manulife Financial and Eli Lilly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Manulife Financial Corp and Eli Lilly and, you can compare the effects of market volatilities on Manulife Financial 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 Manulife Financial with a short position of Eli Lilly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Manulife Financial and Eli Lilly.

Diversification Opportunities for Manulife Financial and Eli Lilly

-0.8
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Manulife and Eli is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial Corp and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and Manulife Financial 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 Manulife Financial Corp 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 Manulife Financial i.e., Manulife Financial and Eli Lilly go up and down completely randomly.

Pair Corralation between Manulife Financial and Eli Lilly

Assuming the 90 days trading horizon Manulife Financial Corp is expected to under-perform the Eli Lilly. But the stock apears to be less risky and, when comparing its historical volatility, Manulife Financial Corp is 1.77 times less risky than Eli Lilly. The stock trades about -0.13 of its potential returns per unit of risk. The Eli Lilly and is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,808  in Eli Lilly and on September 24, 2024 and sell it today you would earn a total of  50.00  from holding Eli Lilly and or generate 1.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Manulife Financial Corp  vs.  Eli Lilly and

 Performance 
       Timeline  
Manulife Financial Corp 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Financial Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Manulife Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Eli Lilly 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Manulife Financial and Eli Lilly Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Manulife Financial and Eli Lilly

The main advantage of trading using opposite Manulife Financial and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Manulife Financial 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 Manulife Financial Corp 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.
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.

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