Correlation Between Eli Lilly and International Paper
Can any of the company-specific risk be diversified away by investing in both Eli Lilly and International Paper 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 International Paper 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 International Paper, you can compare the effects of market volatilities on Eli Lilly and International Paper 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 International Paper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eli Lilly and International Paper.
Diversification Opportunities for Eli Lilly and International Paper
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Eli and International is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and International Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Paper 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 International Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Paper has no effect on the direction of Eli Lilly i.e., Eli Lilly and International Paper go up and down completely randomly.
Pair Corralation between Eli Lilly and International Paper
Assuming the 90 days trading horizon Eli Lilly and is expected to under-perform the International Paper. In addition to that, Eli Lilly is 14.1 times more volatile than International Paper. It trades about -0.03 of its total potential returns per unit of risk. International Paper is currently generating about 0.22 per unit of volatility. If you would invest 87,356 in International Paper on September 2, 2024 and sell it today you would earn a total of 944.00 from holding International Paper or generate 1.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Eli Lilly and vs. International Paper
Performance |
| Timeline |
| Eli Lilly |
| International Paper |
Eli Lilly and International Paper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eli Lilly and International Paper
The main advantage of trading using opposite Eli Lilly and International Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eli Lilly position performs unexpectedly, International Paper 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 International Paper will offset losses from the drop in International Paper's long position.| Eli Lilly vs. Roche Holding AG | Eli Lilly vs. Amgen Inc | Eli Lilly vs. Gilead Sciences | Eli Lilly vs. Biogen Inc |
| International Paper vs. CVS Health | International Paper vs. DXC Technology | International Paper vs. Grupo Carso SAB | International Paper vs. Verizon Communications |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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