Correlation Between Greater Cannabis and Eisai Co

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

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

Diversification Opportunities for Greater Cannabis and Eisai Co

0.18

Correlation Coefficient

Greater Cannabis  Eisai Co

Average diversification

The 3 months correlation between Greater and Eisai is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Greater Cannabis and Eisai Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eisai Co and Greater Cannabis 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 Greater Cannabis are associated (or correlated) with Eisai Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eisai Co has no effect on the direction of Greater Cannabis i.e., Greater Cannabis and Eisai Co go up and down completely randomly.

Pair Corralation between Greater Cannabis and Eisai Co

Given the investment horizon of 90 days Greater Cannabis is expected to generate 11.15 times more return on investment than Eisai Co. However, Greater Cannabis is 11.15 times more volatile than Eisai Co. It trades about 0.13 of its potential returns per unit of risk. Eisai Co is currently generating about 0.07 per unit of risk. If you would invest  0.04  in Greater Cannabis on December 29, 2024 and sell it today you would earn a total of  0.03  from holding Greater Cannabis or generate 75.0% return on investment over 90 days.

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

Greater Cannabis  vs.  Eisai Co

Greater Cannabis

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Greater Cannabis are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Greater Cannabis displayed solid returns over the last few months and may actually be approaching a breakup point.

Eisai Co

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eisai Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain forward indicators, Eisai Co may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Greater Cannabis and Eisai Co

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

The idea behind Greater Cannabis and Eisai Co 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.