Correlation Between Eisai Co and ANGI Homeservices

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

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

Diversification Opportunities for Eisai Co and ANGI Homeservices

0.52

Correlation Coefficient

Eisai Co  ANGI Homeservices

Very weak diversification

The 3 months correlation between Eisai and ANGI is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Eisai Co and ANGI Homeservices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ANGI Homeservices and Eisai Co 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 Eisai Co are associated (or correlated) with ANGI Homeservices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ANGI Homeservices has no effect on the direction of Eisai Co i.e., Eisai Co and ANGI Homeservices go up and down completely randomly.

Pair Corralation between Eisai Co and ANGI Homeservices

Assuming the 90 days horizon Eisai Co is expected to generate 0.69 times more return on investment than ANGI Homeservices. However, Eisai Co is 1.46 times less risky than ANGI Homeservices. It trades about 0.01 of its potential returns per unit of risk. ANGI Homeservices is currently generating about -0.05 per unit of risk. If you would invest  2,612  in Eisai Co on December 20, 2024 and sell it today you would lose (12.00) from holding Eisai Co or give up 0.46% of portfolio value over 90 days.

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

Eisai Co  vs.  ANGI Homeservices

Eisai Co

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 Co is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ANGI Homeservices

Risk-Adjusted Performance

Very Weak

Over the last 90 days ANGI Homeservices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Eisai Co and ANGI Homeservices

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

The idea behind Eisai Co and ANGI Homeservices 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.