Correlation Between Eisai and PDS Biotechnology

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

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

Diversification Opportunities for Eisai and PDS Biotechnology

0.89

Correlation Coefficient

Eisai  PDS Biotechnology

Very poor diversification

The 3 months correlation between Eisai and PDS is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Eisai Co and PDS Biotechnology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PDS Biotechnology 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 PDS Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PDS Biotechnology Corp has no effect on the direction of Eisai i.e., Eisai and PDS Biotechnology go up and down completely randomly.

Pair Corralation between Eisai and PDS Biotechnology

Assuming the 90 days horizon Eisai Co is expected to generate 0.49 times more return on investment than PDS Biotechnology. However, Eisai Co is 2.03 times less risky than PDS Biotechnology. It trades about -0.08 of its potential returns per unit of risk. PDS Biotechnology Corp is currently generating about -0.04 per unit of risk. If you would invest  4,672  in Eisai Co on October 9, 2024 and sell it today you would lose (2,023) from holding Eisai Co or give up 43.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.6%
Values	Daily Returns

Eisai Co  vs.  PDS Biotechnology 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 fragile 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.

PDS Biotechnology Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PDS Biotechnology Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady 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.

Pair Trading with Eisai and PDS Biotechnology

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

The idea behind Eisai Co and PDS Biotechnology 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 Stocks Directory module to find actively traded stocks across global markets.