Correlation Between Eli Lilly and Orchestra BioMed

Can any of the company-specific risk be diversified away by investing in both Eli Lilly and Orchestra BioMed 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 Orchestra BioMed 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 Orchestra BioMed Holdings, you can compare the effects of market volatilities on Eli Lilly and Orchestra BioMed 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 Orchestra BioMed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eli Lilly and Orchestra BioMed.

Diversification Opportunities for Eli Lilly and Orchestra BioMed

-0.43

Correlation Coefficient

Eli Lilly  Orchestra BioMed

Very good diversification

The 3 months correlation between Eli and Orchestra is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Eli Lilly and and Orchestra BioMed Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orchestra BioMed Holdings 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 Orchestra BioMed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orchestra BioMed Holdings has no effect on the direction of Eli Lilly i.e., Eli Lilly and Orchestra BioMed go up and down completely randomly.

Pair Corralation between Eli Lilly and Orchestra BioMed

Considering the 90-day investment horizon Eli Lilly and is expected to generate 0.33 times more return on investment than Orchestra BioMed. However, Eli Lilly and is 3.04 times less risky than Orchestra BioMed. It trades about 0.08 of its potential returns per unit of risk. Orchestra BioMed Holdings is currently generating about -0.01 per unit of risk. If you would invest  57,600  in Eli Lilly and on September 12, 2024 and sell it today you would earn a total of  22,358  from holding Eli Lilly and or generate 38.82% return on investment over 90 days.

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

Eli Lilly and  vs.  Orchestra BioMed Holdings

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.

Orchestra BioMed Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orchestra BioMed Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Orchestra BioMed is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Eli Lilly and Orchestra BioMed

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

The idea behind Eli Lilly and and Orchestra BioMed Holdings 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.