Correlation Between AEON STORES and Takeda Pharmaceutical

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

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

Diversification Opportunities for AEON STORES and Takeda Pharmaceutical

0.27

Correlation Coefficient

AEON STORES  Takeda Pharmaceutical

Modest diversification

The 3 months correlation between AEON and Takeda is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding AEON STORES and Takeda Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Takeda Pharmaceutical and AEON STORES 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 AEON STORES are associated (or correlated) with Takeda Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Takeda Pharmaceutical has no effect on the direction of AEON STORES i.e., AEON STORES and Takeda Pharmaceutical go up and down completely randomly.

Pair Corralation between AEON STORES and Takeda Pharmaceutical

Assuming the 90 days trading horizon AEON STORES is expected to generate 2.44 times more return on investment than Takeda Pharmaceutical. However, AEON STORES is 2.44 times more volatile than Takeda Pharmaceutical. It trades about -0.01 of its potential returns per unit of risk. Takeda Pharmaceutical is currently generating about -0.02 per unit of risk. If you would invest  8.37  in AEON STORES on October 4, 2024 and sell it today you would lose (2.72) from holding AEON STORES or give up 32.5% of portfolio value over 90 days.

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

AEON STORES  vs.  Takeda Pharmaceutical

AEON STORES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AEON STORES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Takeda Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with AEON STORES and Takeda Pharmaceutical

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

The idea behind AEON STORES and Takeda Pharmaceutical 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.