Correlation Between Apple and Eisai

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

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

Diversification Opportunities for Apple and Eisai

0.11

Correlation Coefficient

Apple  Eisai

Average diversification

The 3 months correlation between Apple and Eisai is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Eisai Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eisai and Apple 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 Apple Inc are associated (or correlated) with Eisai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eisai has no effect on the direction of Apple i.e., Apple and Eisai go up and down completely randomly.

Pair Corralation between Apple and Eisai

Assuming the 90 days trading horizon Apple Inc is expected to under-perform the Eisai. But the stock apears to be less risky and, when comparing its historical volatility, Apple Inc is 1.32 times less risky than Eisai. The stock trades about -0.15 of its potential returns per unit of risk. The Eisai Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,618  in Eisai Co on December 26, 2024 and sell it today you would earn a total of  3.00  from holding Eisai Co or generate 0.11% return on investment over 90 days.

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

Apple Inc  vs.  Eisai Co

Apple Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Apple Inc 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 fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Eisai

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eisai Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Eisai is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Apple and Eisai

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

The idea behind Apple Inc and Eisai Co 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.