Correlation Between Elanco Animal and CbdMD
Can any of the company-specific risk be diversified away by investing in both Elanco Animal and CbdMD 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 CbdMD 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 cbdMD Inc, you can compare the effects of market volatilities on Elanco Animal and CbdMD 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 CbdMD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elanco Animal and CbdMD.
Diversification Opportunities for Elanco Animal and CbdMD
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Elanco and CbdMD is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Elanco Animal Health and cbdMD Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on cbdMD Inc 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 CbdMD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of cbdMD Inc has no effect on the direction of Elanco Animal i.e., Elanco Animal and CbdMD go up and down completely randomly.
Pair Corralation between Elanco Animal and CbdMD
Given the investment horizon of 90 days Elanco Animal is expected to generate 1.1 times less return on investment than CbdMD. But when comparing it to its historical volatility, Elanco Animal Health is 1.17 times less risky than CbdMD. It trades about 0.12 of its potential returns per unit of risk. cbdMD Inc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 71.00 in cbdMD Inc on August 28, 2024 and sell it today you would earn a total of 4.00 from holding cbdMD Inc or generate 5.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 76.19% |
| Values | Daily Returns |
Elanco Animal Health vs. cbdMD Inc
Performance |
| Timeline |
| Elanco Animal Health |
| cbdMD Inc |
Elanco Animal and CbdMD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elanco Animal and CbdMD
The main advantage of trading using opposite Elanco Animal and CbdMD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elanco Animal position performs unexpectedly, CbdMD 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 CbdMD will offset losses from the drop in CbdMD's long position.| Elanco Animal vs. Viatris | Elanco Animal vs. Catalent | Elanco Animal vs. Lantheus Holdings | Elanco Animal vs. Haleon plc |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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