Correlation Between Verastem and Elanco Animal
Can any of the company-specific risk be diversified away by investing in both Verastem 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 Verastem and Elanco Animal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verastem and Elanco Animal Health, you can compare the effects of market volatilities on Verastem 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 Verastem with a short position of Elanco Animal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verastem and Elanco Animal.
Diversification Opportunities for Verastem and Elanco Animal
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Verastem and Elanco is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Verastem 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 Verastem 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 Verastem 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 Verastem i.e., Verastem and Elanco Animal go up and down completely randomly.
Pair Corralation between Verastem and Elanco Animal
Given the investment horizon of 90 days Verastem is expected to generate 1.62 times more return on investment than Elanco Animal. However, Verastem is 1.62 times more volatile than Elanco Animal Health. It trades about 0.18 of its potential returns per unit of risk. Elanco Animal Health is currently generating about 0.11 per unit of risk. If you would invest 339.00 in Verastem on August 27, 2024 and sell it today you would earn a total of 61.00 from holding Verastem or generate 17.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verastem vs. Elanco Animal Health
Performance |
| Timeline |
| Verastem |
| Elanco Animal Health |
Verastem and Elanco Animal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verastem and Elanco Animal
The main advantage of trading using opposite Verastem and Elanco Animal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verastem 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.The idea behind Verastem and Elanco Animal Health pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Elanco Animal vs. Viatris | Elanco Animal vs. Catalent | Elanco Animal vs. Lantheus Holdings | Elanco Animal vs. Haleon plc |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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