Correlation Between Roche Holding and Eli Lilly
Can any of the company-specific risk be diversified away by investing in both Roche Holding 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 Roche Holding and Eli Lilly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Roche Holding AG and Eli Lilly and, you can compare the effects of market volatilities on Roche Holding 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 Roche Holding with a short position of Eli Lilly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roche Holding and Eli Lilly.
Diversification Opportunities for Roche Holding and Eli Lilly
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Roche and Eli is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Roche Holding AG and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and Roche Holding 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 Roche Holding AG 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 Roche Holding i.e., Roche Holding and Eli Lilly go up and down completely randomly.
Pair Corralation between Roche Holding and Eli Lilly
Assuming the 90 days trading horizon Roche Holding AG is expected to under-perform the Eli Lilly. But the stock apears to be less risky and, when comparing its historical volatility, Roche Holding AG is 2.02 times less risky than Eli Lilly. The stock trades about -0.25 of its potential returns per unit of risk. The Eli Lilly and is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,522,125 in Eli Lilly and on September 24, 2024 and sell it today you would earn a total of 20,075 from holding Eli Lilly and or generate 1.32% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Roche Holding AG vs. Eli Lilly and
Performance |
Timeline |
Roche Holding AG |
Eli Lilly |
Roche Holding and Eli Lilly Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Roche Holding and Eli Lilly
The main advantage of trading using opposite Roche Holding and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roche Holding 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.Roche Holding vs. Eli Lilly and | Roche Holding vs. Merck Company | Roche Holding vs. Bristol Myers Squibb | Roche Holding vs. Sanofi |
Eli Lilly vs. Merck Company | Eli Lilly vs. Roche Holding AG | Eli Lilly vs. Bristol Myers Squibb | Eli Lilly vs. Sanofi |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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