Correlation Between Elanco Animal and Takeda Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both Elanco Animal and Takeda Pharmaceutical 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 Elanco Animal and Takeda Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elanco Animal Health and Takeda Pharmaceutical, you can compare the effects of market volatilities on Elanco Animal and Takeda Pharmaceutical 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 Elanco Animal with a short position of Takeda Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elanco Animal and Takeda Pharmaceutical.
Diversification Opportunities for Elanco Animal and Takeda Pharmaceutical
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Elanco and Takeda is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Elanco Animal Health and Takeda Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Takeda Pharmaceutical and Elanco Animal 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 Elanco Animal Health are associated (or correlated) with Takeda Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Takeda Pharmaceutical has no effect on the direction of Elanco Animal i.e., Elanco Animal and Takeda Pharmaceutical go up and down completely randomly.
Pair Corralation between Elanco Animal and Takeda Pharmaceutical
Assuming the 90 days horizon Elanco Animal Health is expected to generate 2.04 times more return on investment than Takeda Pharmaceutical. However, Elanco Animal is 2.04 times more volatile than Takeda Pharmaceutical. It trades about 0.18 of its potential returns per unit of risk. Takeda Pharmaceutical is currently generating about 0.11 per unit of risk. If you would invest 1,150 in Elanco Animal Health on September 5, 2024 and sell it today you would earn a total of 126.00 from holding Elanco Animal Health or generate 10.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Elanco Animal Health vs. Takeda Pharmaceutical
Performance |
| Timeline |
| Elanco Animal Health |
| Takeda Pharmaceutical |
Elanco Animal and Takeda Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elanco Animal and Takeda Pharmaceutical
The main advantage of trading using opposite Elanco Animal and Takeda Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elanco Animal position performs unexpectedly, Takeda Pharmaceutical 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 Takeda Pharmaceutical will offset losses from the drop in Takeda Pharmaceutical's long position.| Elanco Animal vs. Superior Plus Corp | Elanco Animal vs. Origin Agritech | Elanco Animal vs. Identiv | Elanco Animal vs. INTUITIVE SURGICAL |
| Takeda Pharmaceutical vs. Superior Plus Corp | Takeda Pharmaceutical vs. Origin Agritech | Takeda Pharmaceutical vs. Identiv | Takeda Pharmaceutical vs. INTUITIVE SURGICAL |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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