Correlation Between Eisai and Costco Wholesale

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

By analyzing existing cross correlation between Eisai Co and Costco Wholesale Corp, you can compare the effects of market volatilities on Eisai and Costco Wholesale 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 Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eisai and Costco Wholesale.

Diversification Opportunities for Eisai and Costco Wholesale

-0.83

Correlation Coefficient

Eisai  Costco Wholesale

Pay attention - limited upside

The 3 months correlation between Eisai and Costco is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Eisai Co and Costco Wholesale Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale Corp 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 Costco Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costco Wholesale Corp has no effect on the direction of Eisai i.e., Eisai and Costco Wholesale go up and down completely randomly.

Pair Corralation between Eisai and Costco Wholesale

Assuming the 90 days horizon Eisai Co is expected to under-perform the Costco Wholesale. In addition to that, Eisai is 2.37 times more volatile than Costco Wholesale Corp. It trades about -0.15 of its total potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.17 per unit of volatility. If you would invest  79,994  in Costco Wholesale Corp on October 4, 2024 and sell it today you would earn a total of  9,616  from holding Costco Wholesale Corp or generate 12.02% return on investment over 90 days.

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

Eisai Co  vs.  Costco Wholesale Corp

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 uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Costco Wholesale Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Costco Wholesale Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Costco Wholesale may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Eisai and Costco Wholesale

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

The idea behind Eisai Co and Costco Wholesale Corp 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.