Correlation Between Elanco Animal and Biohaven Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both Elanco Animal and Biohaven 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 Biohaven 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 Biohaven Pharmaceutical Holding, you can compare the effects of market volatilities on Elanco Animal and Biohaven 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 Biohaven Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elanco Animal and Biohaven Pharmaceutical.
Diversification Opportunities for Elanco Animal and Biohaven Pharmaceutical
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Elanco and Biohaven is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Elanco Animal Health and Biohaven Pharmaceutical Holdin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biohaven 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 Biohaven Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biohaven Pharmaceutical has no effect on the direction of Elanco Animal i.e., Elanco Animal and Biohaven Pharmaceutical go up and down completely randomly.
Pair Corralation between Elanco Animal and Biohaven Pharmaceutical
Given the investment horizon of 90 days Elanco Animal Health is expected to under-perform the Biohaven Pharmaceutical. But the stock apears to be less risky and, when comparing its historical volatility, Elanco Animal Health is 1.6 times less risky than Biohaven Pharmaceutical. The stock trades about -0.2 of its potential returns per unit of risk. The Biohaven Pharmaceutical Holding is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 3,837 in Biohaven Pharmaceutical Holding on November 29, 2024 and sell it today you would lose (119.00) from holding Biohaven Pharmaceutical Holding or give up 3.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Elanco Animal Health vs. Biohaven Pharmaceutical Holdin
Performance |
| Timeline |
| Elanco Animal Health |
| Biohaven Pharmaceutical |
Elanco Animal and Biohaven Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elanco Animal and Biohaven Pharmaceutical
The main advantage of trading using opposite Elanco Animal and Biohaven Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elanco Animal position performs unexpectedly, Biohaven 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 Biohaven Pharmaceutical will offset losses from the drop in Biohaven Pharmaceutical's long position.| Elanco Animal vs. Viatris | Elanco Animal vs. Lantheus Holdings | Elanco Animal vs. Haleon plc | Elanco Animal vs. Phibro Animal Health |
| Biohaven Pharmaceutical vs. Immunome | Biohaven Pharmaceutical vs. Inhibrx | Biohaven Pharmaceutical vs. Day One Biopharmaceuticals | Biohaven Pharmaceutical vs. Terns Pharmaceuticals |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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