Correlation Between Silver Spike and Elanco Animal

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

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

Diversification Opportunities for Silver Spike and Elanco Animal

-0.68

Correlation Coefficient

Silver Spike  Elanco Animal

Excellent diversification

The 3 months correlation between Silver and Elanco is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Silver Spike Investment 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 Silver Spike 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 Silver Spike Investment 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 Silver Spike i.e., Silver Spike and Elanco Animal go up and down completely randomly.

Pair Corralation between Silver Spike and Elanco Animal

Given the investment horizon of 90 days Silver Spike Investment is expected to generate 0.56 times more return on investment than Elanco Animal. However, Silver Spike Investment is 1.78 times less risky than Elanco Animal. It trades about 0.59 of its potential returns per unit of risk. Elanco Animal Health is currently generating about -0.26 per unit of risk. If you would invest  970.00  in Silver Spike Investment on February 7, 2024 and sell it today you would earn a total of  170.00  from holding Silver Spike Investment or generate 17.53% return on investment over 90 days.

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

Silver Spike Investment  vs.  Elanco Animal Health

Silver Spike Investment

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Silver Spike Investment are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward indicators, Silver Spike exhibited solid returns over the last few months and may actually be approaching a breakup point.

Elanco Animal Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elanco Animal Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Silver Spike and Elanco Animal

The main advantage of trading using opposite Silver Spike and Elanco Animal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silver Spike 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 Silver Spike Investment 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.