Correlation Between Small Cap and Eli Lilly
Can any of the company-specific risk be diversified away by investing in both Small Cap 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 Small Cap and Eli Lilly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Core and Eli Lilly and, you can compare the effects of market volatilities on Small Cap 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 Small Cap with a short position of Eli Lilly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Eli Lilly.
Diversification Opportunities for Small Cap and Eli Lilly
Good diversification
The 3 months correlation between Small and Eli is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and Small Cap 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 Small Cap Core 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 Small Cap i.e., Small Cap and Eli Lilly go up and down completely randomly.
Pair Corralation between Small Cap and Eli Lilly
Assuming the 90 days horizon Small Cap Core is expected to under-perform the Eli Lilly. But the mutual fund apears to be less risky and, when comparing its historical volatility, Small Cap Core is 1.72 times less risky than Eli Lilly. The mutual fund trades about 0.0 of its potential returns per unit of risk. The Eli Lilly and is currently generating about 0.46 of returns per unit of risk over similar time horizon. If you would invest 72,447 in Eli Lilly and on November 18, 2024 and sell it today you would earn a total of 11,980 from holding Eli Lilly and or generate 16.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Core vs. Eli Lilly and
Performance |
| Timeline |
| Small Cap Core |
| Eli Lilly |
Small Cap and Eli Lilly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Eli Lilly
The main advantage of trading using opposite Small Cap and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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.| Small Cap vs. Arrow Managed Futures | Small Cap vs. Intal High Relative | Small Cap vs. Fbanjx | Small Cap vs. Ffcdax |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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