Correlation Between Elanco Animal and DiaMedica Therapeutics
Can any of the company-specific risk be diversified away by investing in both Elanco Animal and DiaMedica Therapeutics 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 DiaMedica Therapeutics 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 DiaMedica Therapeutics, you can compare the effects of market volatilities on Elanco Animal and DiaMedica Therapeutics 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 DiaMedica Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elanco Animal and DiaMedica Therapeutics.
Diversification Opportunities for Elanco Animal and DiaMedica Therapeutics
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Elanco and DiaMedica is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Elanco Animal Health and DiaMedica Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DiaMedica Therapeutics 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 DiaMedica Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DiaMedica Therapeutics has no effect on the direction of Elanco Animal i.e., Elanco Animal and DiaMedica Therapeutics go up and down completely randomly.
Pair Corralation between Elanco Animal and DiaMedica Therapeutics
Given the investment horizon of 90 days Elanco Animal Health is expected to generate 0.98 times more return on investment than DiaMedica Therapeutics. However, Elanco Animal Health is 1.02 times less risky than DiaMedica Therapeutics. It trades about 0.26 of its potential returns per unit of risk. DiaMedica Therapeutics is currently generating about 0.19 per unit of risk. If you would invest 1,293 in Elanco Animal Health on February 20, 2024 and sell it today you would earn a total of 407.00 from holding Elanco Animal Health or generate 31.48% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Elanco Animal Health vs. DiaMedica Therapeutics
Performance |
Timeline |
Elanco Animal Health |
DiaMedica Therapeutics |
Elanco Animal and DiaMedica Therapeutics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Elanco Animal and DiaMedica Therapeutics
The main advantage of trading using opposite Elanco Animal and DiaMedica Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elanco Animal position performs unexpectedly, DiaMedica Therapeutics 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 DiaMedica Therapeutics will offset losses from the drop in DiaMedica Therapeutics' long position.The idea behind Elanco Animal Health and DiaMedica Therapeutics 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.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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
Other Complementary Tools
Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
Global Correlations Find global opportunities by holding instruments from different markets | |
Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance |