Correlation Between Elanco Animal and Frontier Communications

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

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

Diversification Opportunities for Elanco Animal and Frontier Communications

0.25

Correlation Coefficient

Elanco Animal  Frontier Communications

Modest diversification

The 3 months correlation between Elanco and Frontier is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Elanco Animal Health and Frontier Communications Parent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Communications and Elanco Animal 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 Elanco Animal Health are associated (or correlated) with Frontier Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Communications has no effect on the direction of Elanco Animal i.e., Elanco Animal and Frontier Communications go up and down completely randomly.

Pair Corralation between Elanco Animal and Frontier Communications

Given the investment horizon of 90 days Elanco Animal Health is expected to generate 17.14 times more return on investment than Frontier Communications. However, Elanco Animal is 17.14 times more volatile than Frontier Communications Parent. It trades about 0.18 of its potential returns per unit of risk. Frontier Communications Parent is currently generating about 0.02 per unit of risk. If you would invest  951.00  in Elanco Animal Health on May 6, 2025 and sell it today you would earn a total of  456.00  from holding Elanco Animal Health or generate 47.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Elanco Animal Health  vs.  Frontier Communications Parent

Elanco Animal Health

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Elanco Animal Health are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Elanco Animal displayed solid returns over the last few months and may actually be approaching a breakup point.

Frontier Communications

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Frontier Communications Parent are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, Frontier Communications is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Elanco Animal and Frontier Communications

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

The idea behind Elanco Animal Health and Frontier Communications Parent 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.