Correlation Between LILLY and JetBlue Airways

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

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

Diversification Opportunities for LILLY and JetBlue Airways

0.26

Correlation Coefficient

LILLY  JetBlue Airways

Modest diversification

The 3 months correlation between LILLY and JetBlue is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding LILLY ELI 7125 and JetBlue Airways Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JetBlue Airways Corp and LILLY 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 LILLY ELI 7125 are associated (or correlated) with JetBlue Airways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JetBlue Airways Corp has no effect on the direction of LILLY i.e., LILLY and JetBlue Airways go up and down completely randomly.

Pair Corralation between LILLY and JetBlue Airways

Assuming the 90 days trading horizon LILLY is expected to generate 2.9 times less return on investment than JetBlue Airways. But when comparing it to its historical volatility, LILLY ELI 7125 is 6.55 times less risky than JetBlue Airways. It trades about 0.12 of its potential returns per unit of risk. JetBlue Airways Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  753.00  in JetBlue Airways Corp on October 12, 2024 and sell it today you would earn a total of  17.00  from holding JetBlue Airways Corp or generate 2.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	75.0%
Values	Daily Returns

LILLY ELI 7125  vs.  JetBlue Airways Corp

LILLY ELI 7125

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LILLY ELI 7125 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, LILLY is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

JetBlue Airways Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JetBlue Airways Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady essential indicators, JetBlue Airways unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LILLY and JetBlue Airways

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

The idea behind LILLY ELI 7125 and JetBlue Airways Corp 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.