Correlation Between Eli Lilly and Amgen
Can any of the company-specific risk be diversified away by investing in both Eli Lilly and Amgen 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 Amgen 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 Amgen Inc, you can compare the effects of market volatilities on Eli Lilly and Amgen 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 Amgen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eli Lilly and Amgen.
Diversification Opportunities for Eli Lilly and Amgen
Very poor diversification
The 3 months correlation between Eli and Amgen is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen 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 Amgen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amgen Inc has no effect on the direction of Eli Lilly i.e., Eli Lilly and Amgen go up and down completely randomly.
Pair Corralation between Eli Lilly and Amgen
Considering the 90-day investment horizon Eli Lilly and is expected to generate 1.26 times more return on investment than Amgen. However, Eli Lilly is 1.26 times more volatile than Amgen Inc. It trades about 0.09 of its potential returns per unit of risk. Amgen Inc is currently generating about 0.01 per unit of risk. If you would invest 36,577 in Eli Lilly and on August 29, 2024 and sell it today you would earn a total of 42,355 from holding Eli Lilly and or generate 115.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eli Lilly and vs. Amgen Inc
Performance |
| Timeline |
| Eli Lilly |
| Amgen Inc |
Eli Lilly and Amgen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eli Lilly and Amgen
The main advantage of trading using opposite Eli Lilly and Amgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eli Lilly position performs unexpectedly, Amgen 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 Amgen will offset losses from the drop in Amgen's long position.| Eli Lilly vs. Johnson Johnson | Eli Lilly vs. Bristol Myers Squibb | Eli Lilly vs. AbbVie Inc | Eli Lilly vs. Pfizer Inc |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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