Correlation Between Mitsui Chemicals and Eli Lilly

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

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

Diversification Opportunities for Mitsui Chemicals and Eli Lilly

0.53

Correlation Coefficient

Mitsui Chemicals  Eli Lilly

Very weak diversification

The 3 months correlation between Mitsui and Eli is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and Mitsui Chemicals 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 Mitsui Chemicals 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 Mitsui Chemicals i.e., Mitsui Chemicals and Eli Lilly go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and Eli Lilly

Assuming the 90 days trading horizon Mitsui Chemicals is expected to generate 0.61 times more return on investment than Eli Lilly. However, Mitsui Chemicals is 1.65 times less risky than Eli Lilly. It trades about -0.07 of its potential returns per unit of risk. Eli Lilly and is currently generating about -0.07 per unit of risk. If you would invest  2,020  in Mitsui Chemicals on October 17, 2024 and sell it today you would lose (40.00) from holding Mitsui Chemicals or give up 1.98% of portfolio value over 90 days.

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

Mitsui Chemicals  vs.  Eli Lilly and

Mitsui Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsui Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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

Pair Trading with Mitsui Chemicals and Eli Lilly

The main advantage of trading using opposite Mitsui Chemicals and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsui Chemicals 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 Mitsui Chemicals 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.