Correlation Between General Mills and Eli Lilly
Can any of the company-specific risk be diversified away by investing in both General Mills 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 General Mills and Eli Lilly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Mills and Eli Lilly and, you can compare the effects of market volatilities on General Mills 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 General Mills with a short position of Eli Lilly. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Mills and Eli Lilly.
Diversification Opportunities for General Mills and Eli Lilly
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between General and Eli is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding General Mills and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and General Mills 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 General Mills 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 General Mills i.e., General Mills and Eli Lilly go up and down completely randomly.
Pair Corralation between General Mills and Eli Lilly
Assuming the 90 days trading horizon General Mills is expected to generate 1.2 times more return on investment than Eli Lilly. However, General Mills is 1.2 times more volatile than Eli Lilly and. It trades about 0.33 of its potential returns per unit of risk. Eli Lilly and is currently generating about 0.29 per unit of risk. If you would invest 9,082 in General Mills on November 28, 2024 and sell it today you would earn a total of 1,512 from holding General Mills or generate 16.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
General Mills vs. Eli Lilly and
Performance |
| Timeline |
| General Mills |
| Eli Lilly |
General Mills and Eli Lilly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with General Mills and Eli Lilly
The main advantage of trading using opposite General Mills and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Mills 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.| General Mills vs. INTERSHOP Communications Aktiengesellschaft | General Mills vs. Computer And Technologies | General Mills vs. FONIX MOBILE PLC | General Mills vs. Major Drilling Group |
| Eli Lilly vs. Johnson Johnson | Eli Lilly vs. Pfizer Inc | Eli Lilly vs. AstraZeneca PLC | Eli Lilly vs. Amgen 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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