Correlation Between Elanco Animal and AC Immune

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

By analyzing existing cross correlation between Elanco Animal Health and AC Immune, you can compare the effects of market volatilities on Elanco Animal and AC Immune 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 Elanco Animal with a short position of AC Immune. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elanco Animal and AC Immune.

Diversification Opportunities for Elanco Animal and AC Immune

0.71

Correlation Coefficient

Elanco Animal  AC Immune

Poor diversification

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

Pair Corralation between Elanco Animal and AC Immune

Given the investment horizon of 90 days Elanco Animal Health is expected to under-perform the AC Immune. But the stock apears to be less risky and, when comparing its historical volatility, Elanco Animal Health is 1.97 times less risky than AC Immune. The stock trades about -0.01 of its potential returns per unit of risk. The AC Immune is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  311.00  in AC Immune on February 21, 2024 and sell it today you would earn a total of  5.00  from holding AC Immune or generate 1.61% return on investment over 90 days.

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

Elanco Animal Health  vs.  AC Immune

Elanco Animal Health

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Elanco Animal Health are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Elanco Animal may actually be approaching a critical reversion point that can send shares even higher in June 2024.

AC Immune

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AC Immune are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, AC Immune may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Elanco Animal and AC Immune

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

The idea behind Elanco Animal Health and AC Immune 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.