Correlation Between Gilead Sciences and Eli Lilly
Can any of the company-specific risk be diversified away by investing in both Gilead Sciences 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 Gilead Sciences and Eli Lilly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gilead Sciences and Eli Lilly and, you can compare the effects of market volatilities on Gilead Sciences 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 Gilead Sciences with a short position of Eli Lilly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gilead Sciences and Eli Lilly.
Diversification Opportunities for Gilead Sciences and Eli Lilly
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Gilead and Eli is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Gilead Sciences and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and Gilead Sciences 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 Gilead Sciences 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 Gilead Sciences i.e., Gilead Sciences and Eli Lilly go up and down completely randomly.
Pair Corralation between Gilead Sciences and Eli Lilly
Given the investment horizon of 90 days Gilead Sciences is expected to under-perform the Eli Lilly. But the stock apears to be less risky and, when comparing its historical volatility, Gilead Sciences is 1.37 times less risky than Eli Lilly. The stock trades about -0.05 of its potential returns per unit of risk. The Eli Lilly and is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 38,017 in Eli Lilly and on January 17, 2024 and sell it today you would earn a total of 37,060 from holding Eli Lilly and or generate 97.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gilead Sciences vs. Eli Lilly and
Performance |
| Timeline |
| Gilead Sciences |
| Eli Lilly |
Gilead Sciences and Eli Lilly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gilead Sciences and Eli Lilly
The main advantage of trading using opposite Gilead Sciences and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gilead Sciences 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.| Gilead Sciences vs. Amgen Inc | Gilead Sciences vs. Merck Company | Gilead Sciences vs. AbbVie Inc | Gilead Sciences vs. Johnson Johnson |
| Eli Lilly vs. PetIQ Inc | Eli Lilly vs. Emergent Biosolutions | Eli Lilly vs. Neurocrine Biosciences | Eli Lilly vs. Haleon plc |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing |