Correlation Between Premier Foods and Eli Lilly
Can any of the company-specific risk be diversified away by investing in both Premier Foods 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 Premier Foods and Eli Lilly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Premier Foods PLC and Eli Lilly and, you can compare the effects of market volatilities on Premier Foods 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 Premier Foods with a short position of Eli Lilly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier Foods and Eli Lilly.
Diversification Opportunities for Premier Foods and Eli Lilly
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Premier and Eli is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods PLC and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and Premier Foods 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 Premier Foods PLC 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 Premier Foods i.e., Premier Foods and Eli Lilly go up and down completely randomly.
Pair Corralation between Premier Foods and Eli Lilly
Assuming the 90 days trading horizon Premier Foods is expected to generate 1.3 times less return on investment than Eli Lilly. But when comparing it to its historical volatility, Premier Foods PLC is 1.31 times less risky than Eli Lilly. It trades about 0.09 of its potential returns per unit of risk. Eli Lilly and is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 33,306 in Eli Lilly and on September 3, 2024 and sell it today you would earn a total of 41,834 from holding Eli Lilly and or generate 125.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Premier Foods PLC vs. Eli Lilly and
Performance |
| Timeline |
| Premier Foods PLC |
| Eli Lilly |
Premier Foods and Eli Lilly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Premier Foods and Eli Lilly
The main advantage of trading using opposite Premier Foods and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premier Foods 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.| Premier Foods vs. Nestl SA | Premier Foods vs. Kraft Heinz Co | Premier Foods vs. General Mills | Premier Foods vs. Kellogg Company |
| Eli Lilly vs. Premier Foods PLC | Eli Lilly vs. HEALTHCARE REAL A | Eli Lilly vs. Astral Foods Limited | Eli Lilly vs. Ramsay Health Care |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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