Correlation Between Eli Lilly and EXACT Sciences

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

Diversification Opportunities for Eli Lilly and EXACT Sciences

-0.41

Correlation Coefficient

Eli Lilly  EXACT Sciences

Very good diversification

The 3 months correlation between Eli and EXACT is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and EXACT Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EXACT Sciences 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 EXACT Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EXACT Sciences has no effect on the direction of Eli Lilly i.e., Eli Lilly and EXACT Sciences go up and down completely randomly.

Pair Corralation between Eli Lilly and EXACT Sciences

Considering the 90-day investment horizon Eli Lilly and is expected to generate 0.5 times more return on investment than EXACT Sciences. However, Eli Lilly and is 2.0 times less risky than EXACT Sciences. It trades about 0.04 of its potential returns per unit of risk. EXACT Sciences is currently generating about -0.11 per unit of risk. If you would invest  79,093  in Eli Lilly and on March 2, 2024 and sell it today you would earn a total of  2,413  from holding Eli Lilly and or generate 3.05% return on investment over 90 days.

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

Eli Lilly and  vs.  EXACT Sciences

Eli Lilly

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eli Lilly and are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Eli Lilly is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

EXACT Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EXACT Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Eli Lilly and EXACT Sciences

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

The idea behind Eli Lilly and and EXACT Sciences 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.