Correlation Between Elanco Animal and BioAffinity Technologies

Can any of the company-specific risk be diversified away by investing in both Elanco Animal and BioAffinity Technologies 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 BioAffinity Technologies 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 bioAffinity Technologies Warrant, you can compare the effects of market volatilities on Elanco Animal and BioAffinity Technologies 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 BioAffinity Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elanco Animal and BioAffinity Technologies.

Diversification Opportunities for Elanco Animal and BioAffinity Technologies

0.63

Correlation Coefficient

Elanco Animal  BioAffinity Technologies

Poor diversification

The 3 months correlation between Elanco and BioAffinity is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Elanco Animal Health and bioAffinity Technologies Warra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioAffinity Technologies 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 BioAffinity Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BioAffinity Technologies has no effect on the direction of Elanco Animal i.e., Elanco Animal and BioAffinity Technologies go up and down completely randomly.

Pair Corralation between Elanco Animal and BioAffinity Technologies

Given the investment horizon of 90 days Elanco Animal Health is expected to under-perform the BioAffinity Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Elanco Animal Health is 6.95 times less risky than BioAffinity Technologies. The stock trades about -0.08 of its potential returns per unit of risk. The bioAffinity Technologies Warrant is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  117.00  in bioAffinity Technologies Warrant on August 31, 2024 and sell it today you would lose (42.00) from holding bioAffinity Technologies Warrant or give up 35.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Elanco Animal Health  vs.  bioAffinity Technologies Warra

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 latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

BioAffinity Technologies

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in bioAffinity Technologies Warrant are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, BioAffinity Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elanco Animal and BioAffinity Technologies

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

The idea behind Elanco Animal Health and bioAffinity Technologies Warrant 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.