Correlation Between Eli Lilly and Aurora Cannabis
Can any of the company-specific risk be diversified away by investing in both Eli Lilly and Aurora Cannabis 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 Aurora Cannabis 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 Aurora Cannabis, you can compare the effects of market volatilities on Eli Lilly and Aurora Cannabis 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 Aurora Cannabis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eli Lilly and Aurora Cannabis.
Diversification Opportunities for Eli Lilly and Aurora Cannabis
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eli and Aurora is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and Aurora Cannabis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurora Cannabis 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 Aurora Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurora Cannabis has no effect on the direction of Eli Lilly i.e., Eli Lilly and Aurora Cannabis go up and down completely randomly.
Pair Corralation between Eli Lilly and Aurora Cannabis
Considering the 90-day investment horizon Eli Lilly and is expected to generate 0.46 times more return on investment than Aurora Cannabis. However, Eli Lilly and is 2.16 times less risky than Aurora Cannabis. It trades about -0.17 of its potential returns per unit of risk. Aurora Cannabis is currently generating about -0.11 per unit of risk. If you would invest 87,634 in Eli Lilly and on August 28, 2024 and sell it today you would lose (12,134) from holding Eli Lilly and or give up 13.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eli Lilly and vs. Aurora Cannabis
Performance |
| Timeline |
| Eli Lilly |
| Aurora Cannabis |
Eli Lilly and Aurora Cannabis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eli Lilly and Aurora Cannabis
The main advantage of trading using opposite Eli Lilly and Aurora Cannabis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eli Lilly position performs unexpectedly, Aurora Cannabis 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 Aurora Cannabis will offset losses from the drop in Aurora Cannabis' long position.| Eli Lilly vs. Johnson Johnson | Eli Lilly vs. Bristol Myers Squibb | Eli Lilly vs. AbbVie Inc | Eli Lilly vs. Pfizer Inc |
| Aurora Cannabis vs. Canopy Growth Corp | Aurora Cannabis vs. SNDL Inc | Aurora Cannabis vs. Cronos Group | Aurora Cannabis vs. Curaleaf Holdings |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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