Correlation Between GlaxoSmithKline PLC and Eli Lilly

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Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC 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 GlaxoSmithKline PLC and Eli Lilly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GlaxoSmithKline PLC ADR and Eli Lilly and, you can compare the effects of market volatilities on GlaxoSmithKline PLC 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 GlaxoSmithKline PLC with a short position of Eli Lilly. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Eli Lilly.

Diversification Opportunities for GlaxoSmithKline PLC and Eli Lilly

GlaxoSmithKlineEliDiversified AwayGlaxoSmithKlineEliDiversified Away100%
0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between GlaxoSmithKline and Eli is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and GlaxoSmithKline PLC 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 GlaxoSmithKline PLC ADR 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 GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Eli Lilly go up and down completely randomly.

Pair Corralation between GlaxoSmithKline PLC and Eli Lilly

Considering the 90-day investment horizon GlaxoSmithKline PLC is expected to generate 1.21 times less return on investment than Eli Lilly. In addition to that, GlaxoSmithKline PLC is 1.6 times more volatile than Eli Lilly and. It trades about 0.19 of its total potential returns per unit of risk. Eli Lilly and is currently generating about 0.37 per unit of volatility. If you would invest  80,678  in Eli Lilly and on November 27, 2024 and sell it today you would earn a total of  9,502  from holding Eli Lilly and or generate 11.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

GlaxoSmithKline PLC ADR  vs.  Eli Lilly and

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -5051015
JavaScript chart by amCharts 3.21.15GSK LLY
       Timeline  
GlaxoSmithKline PLC ADR 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in GlaxoSmithKline PLC ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, GlaxoSmithKline PLC disclosed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb32333435363738
Eli Lilly 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Eli Lilly and are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly sluggish essential indicators, Eli Lilly showed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb750800850900

GlaxoSmithKline PLC and Eli Lilly Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.27-3.95-2.62-1.30.01.362.734.115.49 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15GSK LLY
       Returns  

Pair Trading with GlaxoSmithKline PLC and Eli Lilly

The main advantage of trading using opposite GlaxoSmithKline PLC and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC 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.
The idea behind GlaxoSmithKline PLC ADR and Eli Lilly and pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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