Correlation Between Eli Lilly and AbbVie
Can any of the company-specific risk be diversified away by investing in both Eli Lilly and AbbVie 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 AbbVie 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 AbbVie Inc, you can compare the effects of market volatilities on Eli Lilly and AbbVie 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 AbbVie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eli Lilly and AbbVie.
Diversification Opportunities for Eli Lilly and AbbVie
Very weak diversification
The 3 months correlation between Eli and AbbVie is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and AbbVie Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AbbVie Inc 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 AbbVie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AbbVie Inc has no effect on the direction of Eli Lilly i.e., Eli Lilly and AbbVie go up and down completely randomly.
Pair Corralation between Eli Lilly and AbbVie
Considering the 90-day investment horizon Eli Lilly and is expected to under-perform the AbbVie. But the stock apears to be less risky and, when comparing its historical volatility, Eli Lilly and is 1.32 times less risky than AbbVie. The stock trades about -0.3 of its potential returns per unit of risk. The AbbVie Inc is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 18,968 in AbbVie Inc on August 28, 2024 and sell it today you would lose (1,262) from holding AbbVie Inc or give up 6.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eli Lilly and vs. AbbVie Inc
Performance |
| Timeline |
| Eli Lilly |
| AbbVie Inc |
Eli Lilly and AbbVie Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eli Lilly and AbbVie
The main advantage of trading using opposite Eli Lilly and AbbVie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eli Lilly position performs unexpectedly, AbbVie 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 AbbVie will offset losses from the drop in AbbVie's long position.| Eli Lilly vs. Johnson Johnson | Eli Lilly vs. Bristol Myers Squibb | Eli Lilly vs. AbbVie Inc | Eli Lilly vs. Pfizer Inc |
| AbbVie vs. Eliem Therapeutics | AbbVie vs. HCW Biologics | AbbVie vs. Scpharmaceuticals | AbbVie vs. Milestone Pharmaceuticals |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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