Correlation Between Swedish Orphan and Eisai

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

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

Diversification Opportunities for Swedish Orphan and Eisai

0.19

Correlation Coefficient

Swedish Orphan  Eisai

Average diversification

The 3 months correlation between Swedish and Eisai is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Swedish Orphan Biovitrum and Eisai Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eisai and Swedish Orphan 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 Swedish Orphan Biovitrum 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 Swedish Orphan i.e., Swedish Orphan and Eisai go up and down completely randomly.

Pair Corralation between Swedish Orphan and Eisai

Assuming the 90 days horizon Swedish Orphan Biovitrum is expected to generate 0.45 times more return on investment than Eisai. However, Swedish Orphan Biovitrum is 2.24 times less risky than Eisai. It trades about 0.24 of its potential returns per unit of risk. Eisai Co is currently generating about -0.1 per unit of risk. If you would invest  2,484  in Swedish Orphan Biovitrum on September 22, 2024 and sell it today you would earn a total of  164.00  from holding Swedish Orphan Biovitrum or generate 6.6% return on investment over 90 days.

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

Swedish Orphan Biovitrum  vs.  Eisai Co

Swedish Orphan Biovitrum

Risk-Adjusted Performance

0 of 100

Very Weak

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

Eisai

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eisai Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Swedish Orphan and Eisai

The main advantage of trading using opposite Swedish Orphan and Eisai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swedish Orphan 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 Swedish Orphan Biovitrum 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.