Correlation Between Daiichi Sankyo and Great Elm

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

By analyzing existing cross correlation between Daiichi Sankyo and Great Elm Capital, you can compare the effects of market volatilities on Daiichi Sankyo and Great Elm 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 Daiichi Sankyo with a short position of Great Elm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daiichi Sankyo and Great Elm.

Diversification Opportunities for Daiichi Sankyo and Great Elm

-0.58

Correlation Coefficient

Daiichi Sankyo  Great Elm

Excellent diversification

The 3 months correlation between Daiichi and Great is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Daiichi Sankyo and Great Elm Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Elm Capital and Daiichi Sankyo 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 Daiichi Sankyo are associated (or correlated) with Great Elm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Elm Capital has no effect on the direction of Daiichi Sankyo i.e., Daiichi Sankyo and Great Elm go up and down completely randomly.

Pair Corralation between Daiichi Sankyo and Great Elm

Assuming the 90 days horizon Daiichi Sankyo is expected to under-perform the Great Elm. In addition to that, Daiichi Sankyo is 44.04 times more volatile than Great Elm Capital. It trades about -0.04 of its total potential returns per unit of risk. Great Elm Capital is currently generating about 0.04 per unit of volatility. If you would invest  2,500  in Great Elm Capital on September 16, 2024 and sell it today you would earn a total of  3.00  from holding Great Elm Capital or generate 0.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	32.31%
Values	Daily Returns

Daiichi Sankyo  vs.  Great Elm Capital

Daiichi Sankyo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daiichi Sankyo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak 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.

Great Elm Capital

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Great Elm Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Great Elm is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Daiichi Sankyo and Great Elm

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

The idea behind Daiichi Sankyo and Great Elm Capital 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 Global Correlations module to find global opportunities by holding instruments from different markets.