Correlation Between Costco Wholesale and Eli Lilly
Can any of the company-specific risk be diversified away by investing in both Costco Wholesale 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 Costco Wholesale and Eli Lilly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Costco Wholesale and Eli Lilly and, you can compare the effects of market volatilities on Costco Wholesale 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 Costco Wholesale with a short position of Eli Lilly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Costco Wholesale and Eli Lilly.
Diversification Opportunities for Costco Wholesale and Eli Lilly
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Costco and Eli is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Costco Wholesale and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and Costco Wholesale 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 Costco Wholesale 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 Costco Wholesale i.e., Costco Wholesale and Eli Lilly go up and down completely randomly.
Pair Corralation between Costco Wholesale and Eli Lilly
Assuming the 90 days trading horizon Costco Wholesale is expected to generate 0.65 times more return on investment than Eli Lilly. However, Costco Wholesale is 1.54 times less risky than Eli Lilly. It trades about 0.13 of its potential returns per unit of risk. Eli Lilly and is currently generating about -0.08 per unit of risk. If you would invest 1,757,670 in Costco Wholesale on September 2, 2024 and sell it today you would earn a total of 222,830 from holding Costco Wholesale or generate 12.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.41% |
| Values | Daily Returns |
Costco Wholesale vs. Eli Lilly and
Performance |
| Timeline |
| Costco Wholesale |
| Eli Lilly |
Costco Wholesale and Eli Lilly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Costco Wholesale and Eli Lilly
The main advantage of trading using opposite Costco Wholesale and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Costco Wholesale 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.| Costco Wholesale vs. Hoteles City Express | Costco Wholesale vs. Monster Beverage Corp | Costco Wholesale vs. Grupo Hotelero Santa | Costco Wholesale vs. FibraHotel |
| Eli Lilly vs. Roche Holding AG | Eli Lilly vs. Amgen Inc | Eli Lilly vs. Gilead Sciences | Eli Lilly vs. Biogen Inc |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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