Correlation Between Eli Lilly and Chugai Pharmaceutical

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

Diversification Opportunities for Eli Lilly and Chugai Pharmaceutical

0.26

Correlation Coefficient

Eli Lilly  Chugai Pharmaceutical

Modest diversification

The 3 months correlation between Eli and Chugai is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and Chugai Pharmaceutical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chugai Pharmaceutical 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 Chugai Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chugai Pharmaceutical has no effect on the direction of Eli Lilly i.e., Eli Lilly and Chugai Pharmaceutical go up and down completely randomly.

Pair Corralation between Eli Lilly and Chugai Pharmaceutical

Considering the 90-day investment horizon Eli Lilly and is expected to generate 0.8 times more return on investment than Chugai Pharmaceutical. However, Eli Lilly and is 1.25 times less risky than Chugai Pharmaceutical. It trades about 0.18 of its potential returns per unit of risk. Chugai Pharmaceutical Co is currently generating about 0.05 per unit of risk. If you would invest  31,156  in Eli Lilly and on January 25, 2024 and sell it today you would earn a total of  43,413  from holding Eli Lilly and or generate 139.34% return on investment over 90 days.

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

Eli Lilly and  vs.  Chugai Pharmaceutical Co

Eli Lilly

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eli Lilly and are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady essential indicators, Eli Lilly showed solid returns over the last few months and may actually be approaching a breakup point.

Chugai Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chugai Pharmaceutical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Eli Lilly and Chugai Pharmaceutical

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

The idea behind Eli Lilly and and Chugai Pharmaceutical Co 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.