Correlation Between United Guardian and LILLY

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

By analyzing existing cross correlation between United Guardian and LILLY ELI 7125, you can compare the effects of market volatilities on United Guardian and 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 United Guardian with a short position of LILLY. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Guardian and LILLY.

Diversification Opportunities for United Guardian and LILLY

0.61

Correlation Coefficient

United Guardian  LILLY

Poor diversification

The 3 months correlation between United and LILLY is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding United Guardian and LILLY ELI 7125 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LILLY ELI 7125 and United Guardian 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 United Guardian are associated (or correlated) with LILLY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LILLY ELI 7125 has no effect on the direction of United Guardian i.e., United Guardian and LILLY go up and down completely randomly.

Pair Corralation between United Guardian and LILLY

If you would invest  1,125  in United Guardian on September 27, 2024 and sell it today you would lose (160.00) from holding United Guardian or give up 14.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	0.0%
Values	Daily Returns

United Guardian  vs.  LILLY ELI 7125

United Guardian

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Guardian has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

LILLY ELI 7125

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LILLY ELI 7125 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LILLY is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United Guardian and LILLY

The main advantage of trading using opposite United Guardian and LILLY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Guardian position performs unexpectedly, 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 LILLY will offset losses from the drop in LILLY's long position.

The idea behind United Guardian and LILLY ELI 7125 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.