Correlation Between Eli Lilly and Terns Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Eli Lilly and Terns Pharmaceuticals 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 Terns Pharmaceuticals 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 Terns Pharmaceuticals, you can compare the effects of market volatilities on Eli Lilly and Terns Pharmaceuticals 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 Terns Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eli Lilly and Terns Pharmaceuticals.
Diversification Opportunities for Eli Lilly and Terns Pharmaceuticals
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eli and Terns is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and Terns Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terns Pharmaceuticals 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 Terns Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terns Pharmaceuticals has no effect on the direction of Eli Lilly i.e., Eli Lilly and Terns Pharmaceuticals go up and down completely randomly.
Pair Corralation between Eli Lilly and Terns Pharmaceuticals
Considering the 90-day investment horizon Eli Lilly and is expected to generate 0.43 times more return on investment than Terns Pharmaceuticals. However, Eli Lilly and is 2.35 times less risky than Terns Pharmaceuticals. It trades about -0.08 of its potential returns per unit of risk. Terns Pharmaceuticals is currently generating about -0.05 per unit of risk. If you would invest 81,751 in Eli Lilly and on September 13, 2024 and sell it today you would lose (3,294) from holding Eli Lilly and or give up 4.03% 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. Terns Pharmaceuticals
Performance |
| Timeline |
| Eli Lilly |
| Terns Pharmaceuticals |
Eli Lilly and Terns Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eli Lilly and Terns Pharmaceuticals
The main advantage of trading using opposite Eli Lilly and Terns Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eli Lilly position performs unexpectedly, Terns Pharmaceuticals 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 Terns Pharmaceuticals will offset losses from the drop in Terns Pharmaceuticals' long position.| Eli Lilly vs. Johnson Johnson | Eli Lilly vs. Bristol Myers Squibb | Eli Lilly vs. AbbVie Inc | Eli Lilly vs. Pfizer Inc |
| Terns Pharmaceuticals vs. Emergent Biosolutions | Terns Pharmaceuticals vs. Bausch Health Companies | Terns Pharmaceuticals vs. Neurocrine Biosciences | Terns Pharmaceuticals vs. Teva Pharma Industries |
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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