Correlation Between Boeing and LILLY

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

By analyzing existing cross correlation between The Boeing and LILLY ELI 31, you can compare the effects of market volatilities on Boeing and LILLY 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 Boeing with a short position of LILLY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boeing and LILLY.

Diversification Opportunities for Boeing and LILLY

-0.07

Correlation Coefficient

Boeing  LILLY

Good diversification

The 3 months correlation between Boeing and LILLY is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and LILLY ELI 31 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LILLY ELI 31 and Boeing 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 The Boeing are associated (or correlated) with LILLY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LILLY ELI 31 has no effect on the direction of Boeing i.e., Boeing and LILLY go up and down completely randomly.

Pair Corralation between Boeing and LILLY

Allowing for the 90-day total investment horizon The Boeing is expected to under-perform the LILLY. In addition to that, Boeing is 6.18 times more volatile than LILLY ELI 31. It trades about -0.06 of its total potential returns per unit of risk. LILLY ELI 31 is currently generating about 0.03 per unit of volatility. If you would invest  9,502  in LILLY ELI 31 on August 24, 2024 and sell it today you would earn a total of  83.00  from holding LILLY ELI 31 or generate 0.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	76.0%
Values	Daily Returns

The Boeing  vs.  LILLY ELI 31

Boeing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Boeing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

LILLY ELI 31

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LILLY ELI 31 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LILLY is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Boeing and LILLY

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

The idea behind The Boeing and LILLY ELI 31 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.