Correlation Between Eli Lilly and Medtronic PLC
Can any of the company-specific risk be diversified away by investing in both Eli Lilly and Medtronic 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 Medtronic 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 Medtronic PLC, you can compare the effects of market volatilities on Eli Lilly and Medtronic 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 Medtronic PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eli Lilly and Medtronic PLC.
Diversification Opportunities for Eli Lilly and Medtronic PLC
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Eli and Medtronic is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and Medtronic PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medtronic 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 Medtronic PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medtronic PLC has no effect on the direction of Eli Lilly i.e., Eli Lilly and Medtronic PLC go up and down completely randomly.
Pair Corralation between Eli Lilly and Medtronic PLC
Considering the 90-day investment horizon Eli Lilly and is expected to under-perform the Medtronic PLC. In addition to that, Eli Lilly is 1.89 times more volatile than Medtronic PLC. It trades about -0.01 of its total potential returns per unit of risk. Medtronic PLC is currently generating about 0.05 per unit of volatility. If you would invest 8,076 in Medtronic PLC on August 30, 2024 and sell it today you would earn a total of 551.00 from holding Medtronic PLC or generate 6.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eli Lilly and vs. Medtronic PLC
Performance |
| Timeline |
| Eli Lilly |
| Medtronic PLC |
Eli Lilly and Medtronic PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eli Lilly and Medtronic PLC
The main advantage of trading using opposite Eli Lilly and Medtronic PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eli Lilly position performs unexpectedly, Medtronic 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 Medtronic PLC will offset losses from the drop in Medtronic PLC's long position.| Eli Lilly vs. Emergent Biosolutions | Eli Lilly vs. Bausch Health Companies | Eli Lilly vs. Neurocrine Biosciences | Eli Lilly vs. Teva Pharma Industries |
| Medtronic PLC vs. Edwards Lifesciences Corp | Medtronic PLC vs. Abbott Laboratories | Medtronic PLC vs. Boston Scientific Corp | Medtronic PLC vs. Zimmer Biomet 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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