Correlation Between Visa and Eli Lilly

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

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

Diversification Opportunities for Visa and Eli Lilly

-0.77

Correlation Coefficient

Visa  Eli Lilly

Pay attention - limited upside

The 3 months correlation between Visa and Eli is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and Visa 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 Visa Class A 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 Visa i.e., Visa and Eli Lilly go up and down completely randomly.

Pair Corralation between Visa and Eli Lilly

Taking into account the 90-day investment horizon Visa Class A is expected to under-perform the Eli Lilly. But the stock apears to be less risky and, when comparing its historical volatility, Visa Class A is 1.75 times less risky than Eli Lilly. The stock trades about -0.11 of its potential returns per unit of risk. The Eli Lilly and is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  75,300  in Eli Lilly and on October 13, 2024 and sell it today you would earn a total of  1,740  from holding Eli Lilly and or generate 2.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	89.47%
Values	Daily Returns

Visa Class A  vs.  Eli Lilly and

Visa Class A

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 latest fragile performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Visa and Eli Lilly

The main advantage of trading using opposite Visa and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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 Visa Class A 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.