Correlation Between Eisai Co and Global Hemp

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

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

Diversification Opportunities for Eisai Co and Global Hemp

0.39

Correlation Coefficient

Eisai Co  Global Hemp

Weak diversification

The 3 months correlation between Eisai and Global is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Eisai Co and Global Hemp Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Hemp Group 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 Global Hemp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Hemp Group has no effect on the direction of Eisai Co i.e., Eisai Co and Global Hemp go up and down completely randomly.

Pair Corralation between Eisai Co and Global Hemp

Assuming the 90 days horizon Eisai Co is expected to generate 0.22 times more return on investment than Global Hemp. However, Eisai Co is 4.46 times less risky than Global Hemp. It trades about -0.14 of its potential returns per unit of risk. Global Hemp Group is currently generating about -0.05 per unit of risk. If you would invest  4,036  in Eisai Co on August 31, 2024 and sell it today you would lose (1,033) from holding Eisai Co or give up 25.59% of portfolio value over 90 days.

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

Eisai Co  vs.  Global Hemp Group

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. Despite inconsistent performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Global Hemp Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Hemp Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Eisai Co and Global Hemp

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

The idea behind Eisai Co and Global Hemp Group 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.