Correlation Between Eliem Therapeutics and Elanco Animal

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

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

Diversification Opportunities for Eliem Therapeutics and Elanco Animal

-0.13

Correlation Coefficient

Eliem Therapeutics  Elanco Animal

Good diversification

The 3 months correlation between Eliem and Elanco is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Eliem Therapeutics and Elanco Animal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elanco Animal Health and Eliem Therapeutics 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 Eliem Therapeutics are associated (or correlated) with Elanco Animal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elanco Animal Health has no effect on the direction of Eliem Therapeutics i.e., Eliem Therapeutics and Elanco Animal go up and down completely randomly.

Pair Corralation between Eliem Therapeutics and Elanco Animal

Given the investment horizon of 90 days Eliem Therapeutics is expected to generate 3.43 times more return on investment than Elanco Animal. However, Eliem Therapeutics is 3.43 times more volatile than Elanco Animal Health. It trades about 0.2 of its potential returns per unit of risk. Elanco Animal Health is currently generating about 0.04 per unit of risk. If you would invest  262.00  in Eliem Therapeutics on February 19, 2024 and sell it today you would earn a total of  563.00  from holding Eliem Therapeutics or generate 214.89% return on investment over 90 days.

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

Eliem Therapeutics  vs.  Elanco Animal Health

Eliem Therapeutics

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eliem Therapeutics are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Eliem Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

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 fragile basic indicators, Elanco Animal may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Eliem Therapeutics and Elanco Animal

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

The idea behind Eliem Therapeutics and Elanco Animal Health 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.