Correlation Between Palantir Technologies and Eli Lilly

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

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

Diversification Opportunities for Palantir Technologies and Eli Lilly

-0.66

Correlation Coefficient

Palantir Technologies  Eli Lilly

Excellent diversification

The 3 months correlation between Palantir and Eli is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Palantir Technologies and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and Palantir Technologies 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 Palantir Technologies 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 Palantir Technologies i.e., Palantir Technologies and Eli Lilly go up and down completely randomly.

Pair Corralation between Palantir Technologies and Eli Lilly

Assuming the 90 days horizon Palantir Technologies is expected to generate 1.39 times more return on investment than Eli Lilly. However, Palantir Technologies is 1.39 times more volatile than Eli Lilly and. It trades about 0.34 of its potential returns per unit of risk. Eli Lilly and is currently generating about 0.16 per unit of risk. If you would invest  6,126  in Palantir Technologies on September 24, 2024 and sell it today you would earn a total of  1,574  from holding Palantir Technologies or generate 25.69% return on investment over 90 days.

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

Palantir Technologies  vs.  Eli Lilly and

Palantir Technologies

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Palantir Technologies are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Palantir Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

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 current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Palantir Technologies and Eli Lilly

The main advantage of trading using opposite Palantir Technologies and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palantir Technologies 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 Palantir Technologies 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.