Correlation Between Eisai and Swedish Orphan

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

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

Diversification Opportunities for Eisai and Swedish Orphan

0.19

Correlation Coefficient

Eisai  Swedish Orphan

Average diversification

The 3 months correlation between Eisai and Swedish is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Eisai Co and Swedish Orphan Biovitrum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swedish Orphan Biovitrum and Eisai 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 Swedish Orphan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swedish Orphan Biovitrum has no effect on the direction of Eisai i.e., Eisai and Swedish Orphan go up and down completely randomly.

Pair Corralation between Eisai and Swedish Orphan

Assuming the 90 days horizon Eisai Co is expected to under-perform the Swedish Orphan. In addition to that, Eisai is 2.24 times more volatile than Swedish Orphan Biovitrum. It trades about -0.1 of its total potential returns per unit of risk. Swedish Orphan Biovitrum is currently generating about 0.24 per unit of volatility. 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

Eisai Co  vs.  Swedish Orphan Biovitrum

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.

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.

Pair Trading with Eisai and Swedish Orphan

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

The idea behind Eisai Co and Swedish Orphan Biovitrum 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 Global Correlations module to find global opportunities by holding instruments from different markets.