Correlation Between Pfizer and Eli Lilly
Can any of the company-specific risk be diversified away by investing in both Pfizer and Eli Lilly 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 Pfizer and Eli Lilly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pfizer Inc and Eli Lilly and, you can compare the effects of market volatilities on Pfizer and Eli Lilly 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 Pfizer with a short position of Eli Lilly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pfizer and Eli Lilly.
Diversification Opportunities for Pfizer and Eli Lilly
Very poor diversification
The 3 months correlation between Pfizer and Eli is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and Pfizer 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 Pfizer Inc are associated (or correlated) with Eli Lilly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eli Lilly has no effect on the direction of Pfizer i.e., Pfizer and Eli Lilly go up and down completely randomly.
Pair Corralation between Pfizer and Eli Lilly
Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the Eli Lilly. But the stock apears to be less risky and, when comparing its historical volatility, Pfizer Inc is 1.31 times less risky than Eli Lilly. The stock trades about -0.06 of its potential returns per unit of risk. The Eli Lilly and is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 33,219 in Eli Lilly and on August 27, 2024 and sell it today you would earn a total of 41,582 from holding Eli Lilly and or generate 125.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pfizer Inc vs. Eli Lilly and
Performance |
| Timeline |
| Pfizer Inc |
| Eli Lilly |
Pfizer and Eli Lilly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pfizer and Eli Lilly
The main advantage of trading using opposite Pfizer and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer position performs unexpectedly, Eli Lilly 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 Eli Lilly will offset losses from the drop in Eli Lilly's long position.| Pfizer vs. Capricor Therapeutics | Pfizer vs. Soleno Therapeutics | Pfizer vs. Bio Path Holdings | Pfizer vs. Moleculin Biotech |
| 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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