Correlation Between Air Canada and Eli Lilly
Can any of the company-specific risk be diversified away by investing in both Air Canada 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 Air Canada and Eli Lilly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Canada and Eli Lilly and, you can compare the effects of market volatilities on Air Canada 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 Air Canada with a short position of Eli Lilly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Canada and Eli Lilly.
Diversification Opportunities for Air Canada and Eli Lilly
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Air and Eli is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Air Canada and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and Air Canada 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 Air Canada 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 Air Canada i.e., Air Canada and Eli Lilly go up and down completely randomly.
Pair Corralation between Air Canada and Eli Lilly
Assuming the 90 days trading horizon Air Canada is expected to generate 1.04 times more return on investment than Eli Lilly. However, Air Canada is 1.04 times more volatile than Eli Lilly and. It trades about 0.33 of its potential returns per unit of risk. Eli Lilly and is currently generating about -0.12 per unit of risk. If you would invest 1,267 in Air Canada on August 30, 2024 and sell it today you would earn a total of 385.00 from holding Air Canada or generate 30.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Canada vs. Eli Lilly and
Performance |
| Timeline |
| Air Canada |
| Eli Lilly |
Air Canada and Eli Lilly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Canada and Eli Lilly
The main advantage of trading using opposite Air Canada and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Canada 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.| Air Canada vs. Take Two Interactive Software | Air Canada vs. PennyMac Mortgage Investment | Air Canada vs. WisdomTree Investments | Air Canada vs. Check Point Software |
| Eli Lilly vs. Performance Food Group | Eli Lilly vs. Sekisui Chemical Co | Eli Lilly vs. Charoen Pokphand Foods | Eli Lilly vs. Dairy Farm International |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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