Correlation Between Eisai and BANNER

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

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

Diversification Opportunities for Eisai and BANNER

-0.72

Correlation Coefficient

Eisai  BANNER

Pay attention - limited upside

The 3 months correlation between Eisai and BANNER is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Eisai Co and BANNER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANNER 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 BANNER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANNER has no effect on the direction of Eisai i.e., Eisai and BANNER go up and down completely randomly.

Pair Corralation between Eisai and BANNER

Assuming the 90 days horizon Eisai Co is expected to under-perform the BANNER. But the stock apears to be less risky and, when comparing its historical volatility, Eisai Co is 1.01 times less risky than BANNER. The stock trades about -0.13 of its potential returns per unit of risk. The BANNER is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  5,257  in BANNER on September 27, 2024 and sell it today you would earn a total of  1,043  from holding BANNER or generate 19.84% return on investment over 90 days.

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

Eisai Co  vs.  BANNER

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.

BANNER

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BANNER are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, BANNER exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eisai and BANNER

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

The idea behind Eisai Co and BANNER 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.