Correlation Between Eli Lilly and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both Eli Lilly and Johnson Johnson 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 Johnson Johnson 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 Johnson Johnson, you can compare the effects of market volatilities on Eli Lilly and Johnson Johnson 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 Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eli Lilly and Johnson Johnson.
Diversification Opportunities for Eli Lilly and Johnson Johnson
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Eli and Johnson is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson 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 Johnson Johnson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Johnson has no effect on the direction of Eli Lilly i.e., Eli Lilly and Johnson Johnson go up and down completely randomly.
Pair Corralation between Eli Lilly and Johnson Johnson
Considering the 90-day investment horizon Eli Lilly and is expected to under-perform the Johnson Johnson. In addition to that, Eli Lilly is 3.2 times more volatile than Johnson Johnson. It trades about -0.32 of its total potential returns per unit of risk. Johnson Johnson is currently generating about -0.24 per unit of volatility. If you would invest 16,160 in Johnson Johnson on August 27, 2024 and sell it today you would lose (643.00) from holding Johnson Johnson or give up 3.98% 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. Johnson Johnson
Performance |
| Timeline |
| Eli Lilly |
| Johnson Johnson |
Eli Lilly and Johnson Johnson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eli Lilly and Johnson Johnson
The main advantage of trading using opposite Eli Lilly and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eli Lilly position performs unexpectedly, Johnson Johnson 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 Johnson Johnson will offset losses from the drop in Johnson Johnson's long position.| Eli Lilly vs. Capricor Therapeutics | Eli Lilly vs. Soleno Therapeutics | Eli Lilly vs. Bio Path Holdings | Eli Lilly vs. Moleculin Biotech |
| Johnson Johnson vs. Capricor Therapeutics | Johnson Johnson vs. Soleno Therapeutics | Johnson Johnson vs. Bio Path Holdings | Johnson Johnson vs. Moleculin Biotech |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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