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 ADR 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
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between AstraZeneca and Eli is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding AstraZeneca PLC ADR 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 ADR 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
Considering the 90-day investment horizon AstraZeneca PLC ADR is expected to generate 0.87 times more return on investment than Eli Lilly. However, AstraZeneca PLC ADR is 1.14 times less risky than Eli Lilly. It trades about 0.2 of its potential returns per unit of risk. Eli Lilly and is currently generating about -0.15 per unit of risk. If you would invest 6,586 in AstraZeneca PLC ADR on January 19, 2024 and sell it today you would earn a total of 267.00 from holding AstraZeneca PLC ADR or generate 4.05% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
AstraZeneca PLC ADR vs. Eli Lilly and
Performance |
Timeline |
AstraZeneca PLC ADR |
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.The idea behind AstraZeneca PLC ADR 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.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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
Other Complementary Tools
Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account |