Correlation Between Enphase Energy, and Eli Lilly

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

By analyzing existing cross correlation between Enphase Energy, and Eli Lilly and, you can compare the effects of market volatilities on Enphase Energy, 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 Enphase Energy, with a short position of Eli Lilly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enphase Energy, and Eli Lilly.

Diversification Opportunities for Enphase Energy, and Eli Lilly

0.69

Correlation Coefficient

Enphase Energy,  Eli Lilly

Poor diversification

The 3 months correlation between Enphase and Eli is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Enphase Energy, and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and Enphase Energy, 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 Enphase Energy, 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 Enphase Energy, i.e., Enphase Energy, and Eli Lilly go up and down completely randomly.

Pair Corralation between Enphase Energy, and Eli Lilly

Assuming the 90 days trading horizon Enphase Energy, is expected to under-perform the Eli Lilly. In addition to that, Enphase Energy, is 1.72 times more volatile than Eli Lilly and. It trades about -0.13 of its total potential returns per unit of risk. Eli Lilly and is currently generating about -0.07 per unit of volatility. If you would invest  1,814,996  in Eli Lilly and on September 25, 2024 and sell it today you would lose (209,291) from holding Eli Lilly and or give up 11.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Enphase Energy,  vs.  Eli Lilly and

Enphase Energy,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enphase Energy, has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Eli Lilly

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eli Lilly and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Enphase Energy, and Eli Lilly

The main advantage of trading using opposite Enphase Energy, and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enphase Energy, 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.

The idea behind Enphase Energy, and Eli Lilly and 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.