Correlation Between Eisai Co and Leef Brands

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

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

Diversification Opportunities for Eisai Co and Leef Brands

-0.66

Correlation Coefficient

Eisai Co  Leef Brands

Excellent diversification

The 3 months correlation between Eisai and Leef is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Eisai Co and Leef Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leef Brands 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 Leef Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leef Brands has no effect on the direction of Eisai Co i.e., Eisai Co and Leef Brands go up and down completely randomly.

Pair Corralation between Eisai Co and Leef Brands

Assuming the 90 days horizon Eisai Co is expected to under-perform the Leef Brands. But the pink sheet apears to be less risky and, when comparing its historical volatility, Eisai Co is 7.94 times less risky than Leef Brands. The pink sheet trades about -0.24 of its potential returns per unit of risk. The Leef Brands is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  6.67  in Leef Brands on September 2, 2024 and sell it today you would earn a total of  8.33  from holding Leef Brands or generate 124.89% 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.  Leef Brands

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.

Leef Brands

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Leef Brands are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Leef Brands reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eisai Co and Leef Brands

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

The idea behind Eisai Co and Leef Brands 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.