Correlation Between Elixinol Global and Nippon Shinyaku

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

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

Diversification Opportunities for Elixinol Global and Nippon Shinyaku

-0.41

Correlation Coefficient

Elixinol Global  Nippon Shinyaku

Very good diversification

The 3 months correlation between Elixinol and Nippon is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Elixinol Global and Nippon Shinyaku Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Shinyaku and Elixinol Global 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 Elixinol Global are associated (or correlated) with Nippon Shinyaku. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Shinyaku has no effect on the direction of Elixinol Global i.e., Elixinol Global and Nippon Shinyaku go up and down completely randomly.

Pair Corralation between Elixinol Global and Nippon Shinyaku

Assuming the 90 days horizon Elixinol Global is expected to generate 18.56 times more return on investment than Nippon Shinyaku. However, Elixinol Global is 18.56 times more volatile than Nippon Shinyaku Co. It trades about 0.15 of its potential returns per unit of risk. Nippon Shinyaku Co is currently generating about 0.02 per unit of risk. If you would invest  1.74  in Elixinol Global on December 24, 2024 and sell it today you would earn a total of  2.29  from holding Elixinol Global or generate 131.61% return on investment over 90 days.

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

Elixinol Global  vs.  Nippon Shinyaku Co

Elixinol Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Elixinol Global are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Elixinol Global reported solid returns over the last few months and may actually be approaching a breakup point.

Nippon Shinyaku

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Shinyaku Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Nippon Shinyaku is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Elixinol Global and Nippon Shinyaku

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

The idea behind Elixinol Global and Nippon Shinyaku Co 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.