Correlation Between National Retail and Eli Lilly
Can any of the company-specific risk be diversified away by investing in both National Retail 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 National Retail and Eli Lilly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Retail Properties and Eli Lilly and, you can compare the effects of market volatilities on National Retail 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 National Retail with a short position of Eli Lilly. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Retail and Eli Lilly.
Diversification Opportunities for National Retail and Eli Lilly
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and Eli is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and National Retail 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 National Retail Properties 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 National Retail i.e., National Retail and Eli Lilly go up and down completely randomly.
Pair Corralation between National Retail and Eli Lilly
Assuming the 90 days trading horizon National Retail Properties is expected to generate 0.38 times more return on investment than Eli Lilly. However, National Retail Properties is 2.62 times less risky than Eli Lilly. It trades about 0.04 of its potential returns per unit of risk. Eli Lilly and is currently generating about -0.01 per unit of risk. If you would invest 4,014 in National Retail Properties on September 13, 2024 and sell it today you would earn a total of 29.00 from holding National Retail Properties or generate 0.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Retail Properties vs. Eli Lilly and
Performance |
| Timeline |
| National Retail Prop |
| Eli Lilly |
National Retail and Eli Lilly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Retail and Eli Lilly
The main advantage of trading using opposite National Retail and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Retail 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.| National Retail vs. Apple Inc | National Retail vs. Apple Inc | National Retail vs. Apple Inc | National Retail vs. Apple Inc |
| Eli Lilly vs. PICKN PAY STORES | Eli Lilly vs. JIAHUA STORES | Eli Lilly vs. National Retail Properties | Eli Lilly vs. Caseys General Stores |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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