Correlation Between Real Brands and Eisai Co

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

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

Diversification Opportunities for Real Brands and Eisai Co

0.88

Correlation Coefficient

Real Brands  Eisai Co

Very poor diversification

The 3 months correlation between Real and Eisai is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Real Brands and Eisai Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eisai Co and Real Brands 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 Real Brands 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 Real Brands i.e., Real Brands and Eisai Co go up and down completely randomly.

Pair Corralation between Real Brands and Eisai Co

Given the investment horizon of 90 days Real Brands is expected to generate 15.68 times more return on investment than Eisai Co. However, Real Brands is 15.68 times more volatile than Eisai Co. It trades about 0.0 of its potential returns per unit of risk. Eisai Co is currently generating about -0.26 per unit of risk. If you would invest  0.85  in Real Brands on August 31, 2024 and sell it today you would lose (0.84) from holding Real Brands or give up 98.82% of portfolio value over 90 days.

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

Real Brands  vs.  Eisai Co

Real Brands

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 conflicting performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Real Brands and Eisai Co

The main advantage of trading using opposite Real Brands and Eisai Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Real Brands 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 Real Brands 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.