Correlation Between Verizon Communications and Eli Lilly
Can any of the company-specific risk be diversified away by investing in both Verizon Communications 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 Verizon Communications and Eli Lilly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Eli Lilly and, you can compare the effects of market volatilities on Verizon Communications 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 Verizon Communications with a short position of Eli Lilly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Eli Lilly.
Diversification Opportunities for Verizon Communications and Eli Lilly
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Verizon and Eli is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and Verizon Communications 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 Verizon Communications 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 Verizon Communications i.e., Verizon Communications and Eli Lilly go up and down completely randomly.
Pair Corralation between Verizon Communications and Eli Lilly
Assuming the 90 days horizon Verizon Communications is expected to generate 0.94 times more return on investment than Eli Lilly. However, Verizon Communications is 1.07 times less risky than Eli Lilly. It trades about 0.11 of its potential returns per unit of risk. Eli Lilly and is currently generating about -0.08 per unit of risk. If you would invest 79,324 in Verizon Communications on September 2, 2024 and sell it today you would earn a total of 11,426 from holding Verizon Communications or generate 14.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.41% |
| Values | Daily Returns |
Verizon Communications vs. Eli Lilly and
Performance |
| Timeline |
| Verizon Communications |
| Eli Lilly |
Verizon Communications and Eli Lilly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and Eli Lilly
The main advantage of trading using opposite Verizon Communications and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications 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.| Verizon Communications vs. McEwen Mining | Verizon Communications vs. Cognizant Technology Solutions | Verizon Communications vs. First Republic Bank | Verizon Communications vs. Samsung Electronics Co |
| Eli Lilly vs. Roche Holding AG | Eli Lilly vs. Amgen Inc | Eli Lilly vs. Gilead Sciences | Eli Lilly vs. Biogen 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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