Correlation Between Eisai and GulfSlope Energy

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

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

Diversification Opportunities for Eisai and GulfSlope Energy

-0.32

Correlation Coefficient

Eisai  GulfSlope Energy

Very good diversification

The 3 months correlation between Eisai and GulfSlope is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Eisai Co and GulfSlope Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GulfSlope Energy 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 GulfSlope Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GulfSlope Energy has no effect on the direction of Eisai i.e., Eisai and GulfSlope Energy go up and down completely randomly.

Pair Corralation between Eisai and GulfSlope Energy

Assuming the 90 days horizon Eisai Co is expected to under-perform the GulfSlope Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Eisai Co is 13.76 times less risky than GulfSlope Energy. The pink sheet trades about -0.04 of its potential returns per unit of risk. The GulfSlope Energy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.30  in GulfSlope Energy on September 12, 2024 and sell it today you would lose (0.29) from holding GulfSlope Energy or give up 96.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.33%
Values	Daily Returns

Eisai Co  vs.  GulfSlope Energy

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 essential 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.

GulfSlope Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GulfSlope Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, GulfSlope Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Eisai and GulfSlope Energy

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

The idea behind Eisai Co and GulfSlope Energy 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.