Correlation Between Eli Lilly and Amgen

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

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

Diversification Opportunities for Eli Lilly and Amgen

-0.64

Correlation Coefficient

Eli Lilly  Amgen

Excellent diversification

The 3 months correlation between Eli and Amgen is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and Amgen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amgen Inc and Eli Lilly 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 Eli Lilly and are associated (or correlated) with Amgen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amgen Inc has no effect on the direction of Eli Lilly i.e., Eli Lilly and Amgen go up and down completely randomly.

Pair Corralation between Eli Lilly and Amgen

Considering the 90-day investment horizon Eli Lilly and is expected to under-perform the Amgen. But the stock apears to be less risky and, when comparing its historical volatility, Eli Lilly and is 1.24 times less risky than Amgen. The stock trades about -0.1 of its potential returns per unit of risk. The Amgen Inc is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  26,920  in Amgen Inc on February 7, 2024 and sell it today you would earn a total of  3,028  from holding Amgen Inc or generate 11.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Eli Lilly and  vs.  Amgen Inc

Eli Lilly

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eli Lilly and are ranked lower than 1 (%) 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 recent stock price disturbance, may contribute to short-term losses for the investors.

Amgen Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Amgen Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Amgen is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Eli Lilly and Amgen

The main advantage of trading using opposite Eli Lilly and Amgen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eli Lilly position performs unexpectedly, Amgen 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 Amgen will offset losses from the drop in Amgen's long position.

The idea behind Eli Lilly and and Amgen Inc 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.