Correlation Between Johnson Johnson and Eli Lilly
Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and Eli 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 Johnson Johnson and Eli Lilly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and Eli Lilly and, you can compare the effects of market volatilities on Johnson Johnson and Eli 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 Johnson Johnson with a short position of Eli Lilly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and Eli Lilly.
Diversification Opportunities for Johnson Johnson and Eli Lilly
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Johnson and Eli is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and Johnson Johnson 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 Johnson Johnson are associated (or correlated) with Eli Lilly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eli Lilly has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Eli Lilly go up and down completely randomly.
Pair Corralation between Johnson Johnson and Eli Lilly
Considering the 90-day investment horizon Johnson Johnson is expected to generate 32.36 times less return on investment than Eli Lilly. But when comparing it to its historical volatility, Johnson Johnson is 1.81 times less risky than Eli Lilly. It trades about 0.01 of its potential returns per unit of risk. Eli Lilly and is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 35,587 in Eli Lilly and on July 21, 2024 and sell it today you would earn a total of 56,210 from holding Eli Lilly and or generate 157.95% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Johnson Johnson vs. Eli Lilly and
Performance |
Timeline |
Johnson Johnson |
Eli Lilly |
Johnson Johnson and Eli Lilly Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Johnson Johnson and Eli Lilly
The main advantage of trading using opposite Johnson Johnson and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, Eli 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 Eli Lilly will offset losses from the drop in Eli Lilly's long position.Johnson Johnson vs. Merck Company | Johnson Johnson vs. Coca Cola Consolidated | Johnson Johnson vs. Antero Midstream Partners | Johnson Johnson vs. MRC Global |
Eli Lilly vs. Johnson Johnson | Eli Lilly vs. Bristol Myers Squibb | Eli Lilly vs. AbbVie Inc | Eli Lilly vs. Pfizer Inc |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
Other Complementary Tools
Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio |