Correlation Between Eisai Co and MERCK Kommanditgesells

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

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

Diversification Opportunities for Eisai Co and MERCK Kommanditgesells

0.87

Correlation Coefficient

Eisai Co  MERCK Kommanditgesells

Very poor diversification

The 3 months correlation between Eisai and MERCK is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Eisai Co and MERCK Kommanditgesellschaft au in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MERCK Kommanditgesells 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 MERCK Kommanditgesells. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MERCK Kommanditgesells has no effect on the direction of Eisai Co i.e., Eisai Co and MERCK Kommanditgesells go up and down completely randomly.

Pair Corralation between Eisai Co and MERCK Kommanditgesells

Assuming the 90 days horizon Eisai Co is expected to generate 1.13 times more return on investment than MERCK Kommanditgesells. However, Eisai Co is 1.13 times more volatile than MERCK Kommanditgesellschaft auf. It trades about -0.14 of its potential returns per unit of risk. MERCK Kommanditgesellschaft auf is currently generating about -0.17 per unit of risk. If you would invest  4,036  in Eisai Co on September 2, 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	Strong
Accuracy	100.0%
Values	Daily Returns

Eisai Co  vs.  MERCK Kommanditgesellschaft au

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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

MERCK Kommanditgesells

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MERCK Kommanditgesellschaft auf has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic 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.

Pair Trading with Eisai Co and MERCK Kommanditgesells

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

The idea behind Eisai Co and MERCK Kommanditgesellschaft auf 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.