Correlation Between Eli Lilly and BHP
Can any of the company-specific risk be diversified away by investing in both Eli Lilly and BHP 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 BHP 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 BHP Group, you can compare the effects of market volatilities on Eli Lilly and BHP 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 BHP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eli Lilly and BHP.
Diversification Opportunities for Eli Lilly and BHP
Excellent diversification
The 3 months correlation between Eli and BHP is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and BHP Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group 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 BHP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group has no effect on the direction of Eli Lilly i.e., Eli Lilly and BHP go up and down completely randomly.
Pair Corralation between Eli Lilly and BHP
Assuming the 90 days trading horizon Eli Lilly and is expected to generate 1.52 times more return on investment than BHP. However, Eli Lilly is 1.52 times more volatile than BHP Group. It trades about 0.09 of its potential returns per unit of risk. BHP Group is currently generating about 0.01 per unit of risk. If you would invest 711,581 in Eli Lilly and on August 30, 2024 and sell it today you would earn a total of 913,292 from holding Eli Lilly and or generate 128.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eli Lilly and vs. BHP Group
Performance |
| Timeline |
| Eli Lilly |
| BHP Group |
Eli Lilly and BHP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eli Lilly and BHP
The main advantage of trading using opposite Eli Lilly and BHP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eli Lilly position performs unexpectedly, BHP 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 BHP will offset losses from the drop in BHP's long position.| Eli Lilly vs. United States Steel | Eli Lilly vs. FibraHotel | Eli Lilly vs. Lloyds Banking Group | Eli Lilly vs. Cognizant Technology Solutions |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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