Correlation Between Eli Lilly and SEI Investments

Can any of the company-specific risk be diversified away by investing in both Eli Lilly and SEI Investments 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 SEI Investments 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 SEI Investments, you can compare the effects of market volatilities on Eli Lilly and SEI Investments 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 SEI Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eli Lilly and SEI Investments.

Diversification Opportunities for Eli Lilly and SEI Investments

0.71

Correlation Coefficient

Eli Lilly  SEI Investments

Poor diversification

The 3 months correlation between Eli and SEI is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and SEI Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEI Investments 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 SEI Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEI Investments has no effect on the direction of Eli Lilly i.e., Eli Lilly and SEI Investments go up and down completely randomly.

Pair Corralation between Eli Lilly and SEI Investments

Considering the 90-day investment horizon Eli Lilly and is expected to generate 1.46 times more return on investment than SEI Investments. However, Eli Lilly is 1.46 times more volatile than SEI Investments. It trades about -0.1 of its potential returns per unit of risk. SEI Investments is currently generating about -0.33 per unit of risk. If you would invest  76,055  in Eli Lilly and on January 31, 2024 and sell it today you would lose (2,335) from holding Eli Lilly and or give up 3.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Eli Lilly and  vs.  SEI Investments

Eli Lilly

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eli Lilly and are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, Eli Lilly showed solid returns over the last few months and may actually be approaching a breakup point.

SEI Investments

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SEI Investments are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, SEI Investments is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Eli Lilly and SEI Investments

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

The idea behind Eli Lilly and and SEI Investments 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.