Correlation Between Eli Lilly and AstraZeneca PLC
Can any of the company-specific risk be diversified away by investing in both Eli Lilly and AstraZeneca PLC 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 AstraZeneca PLC 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 AstraZeneca PLC, you can compare the effects of market volatilities on Eli Lilly and AstraZeneca PLC 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 AstraZeneca PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eli Lilly and AstraZeneca PLC.
Diversification Opportunities for Eli Lilly and AstraZeneca PLC
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Eli and AstraZeneca is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and AstraZeneca PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC 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 AstraZeneca PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AstraZeneca PLC has no effect on the direction of Eli Lilly i.e., Eli Lilly and AstraZeneca PLC go up and down completely randomly.
Pair Corralation between Eli Lilly and AstraZeneca PLC
Assuming the 90 days trading horizon Eli Lilly and is expected to under-perform the AstraZeneca PLC. In addition to that, Eli Lilly is 1.25 times more volatile than AstraZeneca PLC. It trades about -0.2 of its total potential returns per unit of risk. AstraZeneca PLC is currently generating about -0.17 per unit of volatility. If you would invest 13,930 in AstraZeneca PLC on August 26, 2024 and sell it today you would lose (1,255) from holding AstraZeneca PLC or give up 9.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eli Lilly and vs. AstraZeneca PLC
Performance |
| Timeline |
| Eli Lilly |
| AstraZeneca PLC |
Eli Lilly and AstraZeneca PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eli Lilly and AstraZeneca PLC
The main advantage of trading using opposite Eli Lilly and AstraZeneca PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eli Lilly position performs unexpectedly, AstraZeneca PLC 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 AstraZeneca PLC will offset losses from the drop in AstraZeneca PLC's long position.| Eli Lilly vs. ScanSource | Eli Lilly vs. Fast Retailing Co | Eli Lilly vs. Xinhua Winshare Publishing | Eli Lilly vs. SCANSOURCE |
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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