Correlation Between Takeda Pharmaceutical and Elanco Animal
Can any of the company-specific risk be diversified away by investing in both Takeda Pharmaceutical and Elanco Animal 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 Takeda Pharmaceutical and Elanco Animal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Takeda Pharmaceutical and Elanco Animal Health, you can compare the effects of market volatilities on Takeda Pharmaceutical and Elanco Animal 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 Takeda Pharmaceutical with a short position of Elanco Animal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Takeda Pharmaceutical and Elanco Animal.
Diversification Opportunities for Takeda Pharmaceutical and Elanco Animal
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Takeda and Elanco is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Takeda Pharmaceutical and Elanco Animal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elanco Animal Health and Takeda Pharmaceutical 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 Takeda Pharmaceutical are associated (or correlated) with Elanco Animal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elanco Animal Health has no effect on the direction of Takeda Pharmaceutical i.e., Takeda Pharmaceutical and Elanco Animal go up and down completely randomly.
Pair Corralation between Takeda Pharmaceutical and Elanco Animal
Assuming the 90 days trading horizon Takeda Pharmaceutical is expected to generate 3.37 times less return on investment than Elanco Animal. But when comparing it to its historical volatility, Takeda Pharmaceutical is 2.04 times less risky than Elanco Animal. It trades about 0.11 of its potential returns per unit of risk. Elanco Animal Health is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 1,150 in Elanco Animal Health on September 5, 2024 and sell it today you would earn a total of 126.00 from holding Elanco Animal Health or generate 10.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Takeda Pharmaceutical vs. Elanco Animal Health
Performance |
| Timeline |
| Takeda Pharmaceutical |
| Elanco Animal Health |
Takeda Pharmaceutical and Elanco Animal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Takeda Pharmaceutical and Elanco Animal
The main advantage of trading using opposite Takeda Pharmaceutical and Elanco Animal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Takeda Pharmaceutical position performs unexpectedly, Elanco Animal 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 Elanco Animal will offset losses from the drop in Elanco Animal's long position.| Takeda Pharmaceutical vs. Superior Plus Corp | Takeda Pharmaceutical vs. Origin Agritech | Takeda Pharmaceutical vs. Identiv | Takeda Pharmaceutical vs. INTUITIVE SURGICAL |
| Elanco Animal vs. Superior Plus Corp | Elanco Animal vs. Origin Agritech | Elanco Animal vs. Identiv | Elanco Animal vs. INTUITIVE SURGICAL |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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