Correlation Between Eisai Co and Greater Cannabis

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

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

Diversification Opportunities for Eisai Co and Greater Cannabis

0.69

Correlation Coefficient

Eisai Co  Greater Cannabis

Poor diversification

The 3 months correlation between Eisai and Greater is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Eisai Co and Greater Cannabis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greater Cannabis and Eisai Co 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 Greater Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greater Cannabis has no effect on the direction of Eisai Co i.e., Eisai Co and Greater Cannabis go up and down completely randomly.

Pair Corralation between Eisai Co and Greater Cannabis

Assuming the 90 days horizon Eisai Co is expected to under-perform the Greater Cannabis. But the pink sheet apears to be less risky and, when comparing its historical volatility, Eisai Co is 8.01 times less risky than Greater Cannabis. The pink sheet trades about -0.24 of its potential returns per unit of risk. The Greater Cannabis is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.06  in Greater Cannabis on September 2, 2024 and sell it today you would lose (0.01) from holding Greater Cannabis or give up 16.67% of portfolio value over 90 days.

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

Eisai Co  vs.  Greater Cannabis

Eisai Co

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. In spite of abnormal performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Greater Cannabis

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Greater Cannabis are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Greater Cannabis displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eisai Co and Greater Cannabis

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

The idea behind Eisai Co and Greater Cannabis 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.