Correlation Between Treasury Wine and Eli Lilly

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

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

Diversification Opportunities for Treasury Wine and Eli Lilly

0.44

Correlation Coefficient

Treasury Wine  Eli Lilly

Very weak diversification

The 3 months correlation between Treasury and Eli is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and Treasury Wine 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 Treasury Wine Estates 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 Treasury Wine i.e., Treasury Wine and Eli Lilly go up and down completely randomly.

Pair Corralation between Treasury Wine and Eli Lilly

Assuming the 90 days horizon Treasury Wine Estates is expected to under-perform the Eli Lilly. But the stock apears to be less risky and, when comparing its historical volatility, Treasury Wine Estates is 1.28 times less risky than Eli Lilly. The stock trades about -0.03 of its potential returns per unit of risk. The Eli Lilly and is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  84,445  in Eli Lilly and on September 23, 2024 and sell it today you would lose (8,025) from holding Eli Lilly and or give up 9.5% of portfolio value over 90 days.

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

Treasury Wine Estates  vs.  Eli Lilly and

Treasury Wine Estates

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Treasury Wine Estates are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Treasury Wine is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 comparatively stable basic indicators, Eli Lilly is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Treasury Wine and Eli Lilly

The main advantage of trading using opposite Treasury Wine and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Treasury Wine 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 Treasury Wine Estates 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.