Correlation Between Eli Lilly and CytomX Therapeutics

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

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

Diversification Opportunities for Eli Lilly and CytomX Therapeutics

0.85

Correlation Coefficient

Eli Lilly  CytomX Therapeutics

Very poor diversification

The 3 months correlation between Eli and CytomX is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and CytomX Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CytomX Therapeutics and Eli Lilly 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 Eli Lilly and are associated (or correlated) with CytomX Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CytomX Therapeutics has no effect on the direction of Eli Lilly i.e., Eli Lilly and CytomX Therapeutics go up and down completely randomly.

Pair Corralation between Eli Lilly and CytomX Therapeutics

Considering the 90-day investment horizon Eli Lilly is expected to generate 3.17 times less return on investment than CytomX Therapeutics. But when comparing it to its historical volatility, Eli Lilly and is 7.69 times less risky than CytomX Therapeutics. It trades about 0.07 of its potential returns per unit of risk. CytomX Therapeutics is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  146.00  in CytomX Therapeutics on September 2, 2024 and sell it today you would lose (40.00) from holding CytomX Therapeutics or give up 27.4% of portfolio value over 90 days.

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

Eli Lilly and  vs.  CytomX Therapeutics

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 sluggish performance in the last few months, the Stock's essential 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.

CytomX Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CytomX Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, CytomX Therapeutics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eli Lilly and CytomX Therapeutics

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

The idea behind Eli Lilly and and CytomX Therapeutics 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .