Correlation Between Elanco Animal and Phibro Animal

Can any of the company-specific risk be diversified away by investing in both Elanco Animal and Phibro 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 Elanco Animal and Phibro Animal 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 Phibro Animal Health, you can compare the effects of market volatilities on Elanco Animal and Phibro 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 Elanco Animal with a short position of Phibro Animal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elanco Animal and Phibro Animal.

Diversification Opportunities for Elanco Animal and Phibro Animal

-0.42

Correlation Coefficient

Elanco Animal  Phibro Animal

Very good diversification

The 3 months correlation between Elanco and Phibro is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Elanco Animal Health and Phibro Animal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phibro Animal Health 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 Phibro Animal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phibro Animal Health has no effect on the direction of Elanco Animal i.e., Elanco Animal and Phibro Animal go up and down completely randomly.

Pair Corralation between Elanco Animal and Phibro Animal

Given the investment horizon of 90 days Elanco Animal Health is expected to under-perform the Phibro Animal. In addition to that, Elanco Animal is 1.34 times more volatile than Phibro Animal Health. It trades about -0.07 of its total potential returns per unit of risk. Phibro Animal Health is currently generating about 0.09 per unit of volatility. If you would invest  2,142  in Phibro Animal Health on September 14, 2024 and sell it today you would earn a total of  246.00  from holding Phibro Animal Health or generate 11.48% return on investment over 90 days.

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

Elanco Animal Health  vs.  Phibro Animal Health

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 uncertain 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.

Phibro Animal Health

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Phibro Animal Health are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, Phibro Animal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Elanco Animal and Phibro Animal

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

The idea behind Elanco Animal Health and Phibro 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.