Correlation Between Natural Health and Eli Lilly

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

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

Diversification Opportunities for Natural Health and Eli Lilly

0.14

Correlation Coefficient

Natural Health  Eli Lilly

Average diversification

The 3 months correlation between Natural and Eli is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Natural Health Trends and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and Natural Health 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 Natural Health Trends 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 Natural Health i.e., Natural Health and Eli Lilly go up and down completely randomly.

Pair Corralation between Natural Health and Eli Lilly

Assuming the 90 days trading horizon Natural Health Trends is expected to under-perform the Eli Lilly. In addition to that, Natural Health is 1.16 times more volatile than Eli Lilly and. It trades about -0.08 of its total potential returns per unit of risk. Eli Lilly and is currently generating about -0.01 per unit of volatility. If you would invest  78,984  in Eli Lilly and on September 27, 2024 and sell it today you would lose (2,204) from holding Eli Lilly and or give up 2.79% of portfolio value over 90 days.

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

Natural Health Trends  vs.  Eli Lilly and

Natural Health Trends

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Natural Health Trends has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private 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 very healthy basic indicators, Eli Lilly is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Natural Health and Eli Lilly

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

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.