Correlation Between Yanzhou Coal and Eli Lilly

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

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

Diversification Opportunities for Yanzhou Coal and Eli Lilly

-0.47

Correlation Coefficient

Yanzhou Coal  Eli Lilly

Very good diversification

The 3 months correlation between Yanzhou and Eli is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Yanzhou Coal Mining and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and Yanzhou Coal 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 Yanzhou Coal Mining 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 Yanzhou Coal i.e., Yanzhou Coal and Eli Lilly go up and down completely randomly.

Pair Corralation between Yanzhou Coal and Eli Lilly

Assuming the 90 days horizon Yanzhou Coal is expected to generate 8.13 times less return on investment than Eli Lilly. In addition to that, Yanzhou Coal is 1.0 times more volatile than Eli Lilly and. It trades about 0.0 of its total potential returns per unit of risk. Eli Lilly and is currently generating about 0.03 per unit of volatility. If you would invest  76,259  in Eli Lilly and on December 21, 2024 and sell it today you would earn a total of  1,561  from holding Eli Lilly and or generate 2.05% return on investment over 90 days.

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

Yanzhou Coal Mining  vs.  Eli Lilly and

Yanzhou Coal Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Yanzhou Coal Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Yanzhou Coal 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

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eli Lilly and are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Eli Lilly is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Yanzhou Coal and Eli Lilly

The main advantage of trading using opposite Yanzhou Coal and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yanzhou Coal 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 Yanzhou Coal Mining 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.