Correlation Between Aurora Cannabis and Eli Lilly

Can any of the company-specific risk be diversified away by investing in both Aurora Cannabis 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 Aurora Cannabis and Eli Lilly into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aurora Cannabis and Eli Lilly and, you can compare the effects of market volatilities on Aurora Cannabis 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 Aurora Cannabis with a short position of Eli Lilly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aurora Cannabis and Eli Lilly.

Diversification Opportunities for Aurora Cannabis and Eli Lilly

0.0

Correlation Coefficient

Aurora Cannabis  Eli Lilly

Pay attention - limited upside

The 3 months correlation between Aurora and Eli is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Aurora Cannabis and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and Aurora Cannabis 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 Aurora Cannabis 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 Aurora Cannabis i.e., Aurora Cannabis and Eli Lilly go up and down completely randomly.

Pair Corralation between Aurora Cannabis and Eli Lilly

Considering the 90-day investment horizon Aurora Cannabis is expected to generate 1.04 times less return on investment than Eli Lilly. In addition to that, Aurora Cannabis is 4.19 times more volatile than Eli Lilly and. It trades about 0.03 of its total potential returns per unit of risk. Eli Lilly and is currently generating about 0.15 per unit of volatility. If you would invest  36,102  in Eli Lilly and on February 5, 2024 and sell it today you would earn a total of  37,395  from holding Eli Lilly and or generate 103.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Aurora Cannabis  vs.  Eli Lilly and

Aurora Cannabis

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aurora Cannabis are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Aurora Cannabis sustained solid returns over the last few months and may actually be approaching a breakup point.

Eli Lilly

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eli Lilly and are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Eli Lilly is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aurora Cannabis and Eli Lilly

The main advantage of trading using opposite Aurora Cannabis and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aurora Cannabis 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 Aurora Cannabis 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.

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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.