Correlation Between Eisai and ENTERGY Dusseldorf

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

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

Diversification Opportunities for Eisai and ENTERGY Dusseldorf

-0.83

Correlation Coefficient

Eisai  ENTERGY Dusseldorf

Pay attention - limited upside

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

Pair Corralation between Eisai and ENTERGY Dusseldorf

Assuming the 90 days horizon Eisai Co is expected to under-perform the ENTERGY Dusseldorf. In addition to that, Eisai is 1.7 times more volatile than ENTERGY Dusseldorf. It trades about -0.37 of its total potential returns per unit of risk. ENTERGY Dusseldorf is currently generating about -0.05 per unit of volatility. If you would invest  7,300  in ENTERGY Dusseldorf on September 30, 2024 and sell it today you would lose (100.00) from holding ENTERGY Dusseldorf or give up 1.37% of portfolio value over 90 days.

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

Eisai Co  vs.  ENTERGY Dusseldorf

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.

ENTERGY Dusseldorf

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ENTERGY Dusseldorf are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ENTERGY Dusseldorf unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eisai and ENTERGY Dusseldorf

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

The idea behind Eisai Co and ENTERGY Dusseldorf 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.