Correlation Between AstraZeneca PLC and Eli Lilly
Can any of the company-specific risk be diversified away by investing in both AstraZeneca PLC 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 AstraZeneca PLC and Eli Lilly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AstraZeneca PLC and Eli Lilly and, you can compare the effects of market volatilities on AstraZeneca PLC 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 AstraZeneca PLC with a short position of Eli Lilly. Check out your portfolio center. Please also check ongoing floating volatility patterns of AstraZeneca PLC and Eli Lilly.
Diversification Opportunities for AstraZeneca PLC and Eli Lilly
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between AstraZeneca and Eli is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding AstraZeneca 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 AstraZeneca PLC 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 AstraZeneca 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 AstraZeneca PLC i.e., AstraZeneca PLC and Eli Lilly go up and down completely randomly.
Pair Corralation between AstraZeneca PLC and Eli Lilly
Assuming the 90 days horizon AstraZeneca PLC is expected to generate 10.7 times less return on investment than Eli Lilly. But when comparing it to its historical volatility, AstraZeneca PLC is 1.28 times less risky than Eli Lilly. It trades about 0.01 of its potential returns per unit of risk. Eli Lilly and is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 33,306 in Eli Lilly and on September 3, 2024 and sell it today you would earn a total of 41,834 from holding Eli Lilly and or generate 125.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
AstraZeneca PLC vs. Eli Lilly and
Performance |
| Timeline |
| AstraZeneca PLC |
| Eli Lilly |
AstraZeneca PLC and Eli Lilly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AstraZeneca PLC and Eli Lilly
The main advantage of trading using opposite AstraZeneca PLC and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AstraZeneca PLC 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.| AstraZeneca PLC vs. Eli Lilly and | AstraZeneca PLC vs. AbbVie Inc | AstraZeneca PLC vs. Pfizer Inc | AstraZeneca PLC vs. Superior Plus Corp |
| Eli Lilly vs. Premier Foods PLC | Eli Lilly vs. HEALTHCARE REAL A | Eli Lilly vs. Astral Foods Limited | Eli Lilly vs. Ramsay Health Care |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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