Correlation Between Western Union and Eli Lilly
Can any of the company-specific risk be diversified away by investing in both Western Union 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 Western Union and Eli Lilly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Western Union and Eli Lilly and, you can compare the effects of market volatilities on Western Union 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 Western Union with a short position of Eli Lilly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Union and Eli Lilly.
Diversification Opportunities for Western Union and Eli Lilly
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Western and Eli is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding The Western Union and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and Western Union 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 The Western Union 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 Western Union i.e., Western Union and Eli Lilly go up and down completely randomly.
Pair Corralation between Western Union and Eli Lilly
Assuming the 90 days horizon Western Union is expected to generate 31.39 times less return on investment than Eli Lilly. But when comparing it to its historical volatility, The Western Union is 1.28 times less risky than Eli Lilly. It trades about 0.0 of its potential returns per unit of risk. Eli Lilly and is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 627,714 in Eli Lilly and on August 27, 2024 and sell it today you would earn a total of 903,586 from holding Eli Lilly and or generate 143.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.78% |
| Values | Daily Returns |
The Western Union vs. Eli Lilly and
Performance |
| Timeline |
| Western Union |
| Eli Lilly |
Western Union and Eli Lilly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Union and Eli Lilly
The main advantage of trading using opposite Western Union and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Union 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.The idea behind The Western Union and Eli Lilly and 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.| Eli Lilly vs. Applied Materials | Eli Lilly vs. FIBRA Storage | Eli Lilly vs. First Republic Bank | Eli Lilly vs. Hoteles City Express |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
Other Complementary Tools
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges |