Correlation Between Eli Lilly and Universal Display
Can any of the company-specific risk be diversified away by investing in both Eli Lilly and Universal Display 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 Eli Lilly and Universal Display into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eli Lilly and and Universal Display, you can compare the effects of market volatilities on Eli Lilly and Universal Display 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 Eli Lilly with a short position of Universal Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eli Lilly and Universal Display.
Diversification Opportunities for Eli Lilly and Universal Display
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Eli and Universal is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and Universal Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Display and Eli Lilly 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 Eli Lilly and are associated (or correlated) with Universal Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Display has no effect on the direction of Eli Lilly i.e., Eli Lilly and Universal Display go up and down completely randomly.
Pair Corralation between Eli Lilly and Universal Display
Assuming the 90 days trading horizon Eli Lilly and is expected to generate 0.87 times more return on investment than Universal Display. However, Eli Lilly and is 1.15 times less risky than Universal Display. It trades about 0.08 of its potential returns per unit of risk. Universal Display is currently generating about 0.04 per unit of risk. If you would invest 34,575 in Eli Lilly and on August 27, 2024 and sell it today you would earn a total of 37,495 from holding Eli Lilly and or generate 108.45% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Eli Lilly and vs. Universal Display
Performance |
Timeline |
Eli Lilly |
Universal Display |
Eli Lilly and Universal Display Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Eli Lilly and Universal Display
The main advantage of trading using opposite Eli Lilly and Universal Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eli Lilly position performs unexpectedly, Universal Display 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 Universal Display will offset losses from the drop in Universal Display's long position.Eli Lilly vs. Universal Display | Eli Lilly vs. Cogent Communications Holdings | Eli Lilly vs. Charter Communications | Eli Lilly vs. Wayside Technology Group |
Universal Display vs. Sumitomo Chemical | Universal Display vs. Canadian Utilities Limited | Universal Display vs. British American Tobacco | Universal Display vs. PTT Global Chemical |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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