Correlation Between Eli Lilly and GlaxoSmithKline PLC
Can any of the company-specific risk be diversified away by investing in both Eli Lilly and GlaxoSmithKline PLC 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 GlaxoSmithKline PLC 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 GlaxoSmithKline PLC ADR, you can compare the effects of market volatilities on Eli Lilly and GlaxoSmithKline PLC 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 GlaxoSmithKline PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eli Lilly and GlaxoSmithKline PLC.
Diversification Opportunities for Eli Lilly and GlaxoSmithKline PLC
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Eli and GlaxoSmithKline is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly And and GlaxoSmithKline PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GlaxoSmithKline PLC ADR 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 GlaxoSmithKline PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GlaxoSmithKline PLC ADR has no effect on the direction of Eli Lilly i.e., Eli Lilly and GlaxoSmithKline PLC go up and down completely randomly.
Pair Corralation between Eli Lilly and GlaxoSmithKline PLC
Considering the 90-day investment horizon Eli Lilly And is expected to generate 1.71 times more return on investment than GlaxoSmithKline PLC. However, Eli Lilly is 1.71 times more volatile than GlaxoSmithKline PLC ADR. It trades about 0.06 of its potential returns per unit of risk. GlaxoSmithKline PLC ADR is currently generating about 0.06 per unit of risk. If you would invest 76,500 in Eli Lilly And on December 29, 2023 and sell it today you would earn a total of 1,296 from holding Eli Lilly And or generate 1.69% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Eli Lilly And vs. GlaxoSmithKline PLC ADR
Performance |
Timeline |
Eli Lilly And |
GlaxoSmithKline PLC ADR |
Eli Lilly and GlaxoSmithKline PLC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Eli Lilly and GlaxoSmithKline PLC
The main advantage of trading using opposite Eli Lilly and GlaxoSmithKline PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eli Lilly position performs unexpectedly, GlaxoSmithKline PLC 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 GlaxoSmithKline PLC will offset losses from the drop in GlaxoSmithKline PLC's long position.Eli Lilly vs. Alderon Iron Ore | Eli Lilly vs. Xtant Medical Holdings | Eli Lilly vs. Microbot Medical | Eli Lilly vs. Talis Biomedical Corp |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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