Correlation Between Verona Pharma and Eli Lilly
Can any of the company-specific risk be diversified away by investing in both Verona Pharma 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 Verona Pharma and Eli Lilly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verona Pharma PLC and Eli Lilly and, you can compare the effects of market volatilities on Verona Pharma 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 Verona Pharma with a short position of Eli Lilly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verona Pharma and Eli Lilly.
Diversification Opportunities for Verona Pharma and Eli Lilly
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Verona and Eli is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Verona Pharma PLC and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and Verona Pharma 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 Verona Pharma PLC 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 Verona Pharma i.e., Verona Pharma and Eli Lilly go up and down completely randomly.
Pair Corralation between Verona Pharma and Eli Lilly
Given the investment horizon of 90 days Verona Pharma PLC is expected to generate 2.15 times more return on investment than Eli Lilly. However, Verona Pharma is 2.15 times more volatile than Eli Lilly and. It trades about 0.07 of its potential returns per unit of risk. Eli Lilly and is currently generating about 0.09 per unit of risk. If you would invest 1,394 in Verona Pharma PLC on August 23, 2024 and sell it today you would earn a total of 2,392 from holding Verona Pharma PLC or generate 171.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verona Pharma PLC vs. Eli Lilly and
Performance |
| Timeline |
| Verona Pharma PLC |
| Eli Lilly |
Verona Pharma and Eli Lilly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verona Pharma and Eli Lilly
The main advantage of trading using opposite Verona Pharma and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verona Pharma 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.| Verona Pharma vs. Kiora Pharmaceuticals | Verona Pharma vs. ZyVersa Therapeutics | Verona Pharma vs. Sonnet Biotherapeutics Holdings | Verona Pharma vs. Zura Bio Limited |
| Eli Lilly vs. Johnson Johnson | Eli Lilly vs. Small Cap Core | Eli Lilly vs. Freedom Holding Corp | Eli Lilly vs. Gfl Environmental 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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