Correlation Between X FAB and Eisai

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

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

Diversification Opportunities for X FAB and Eisai

0.27

Correlation Coefficient

X FAB  Eisai

Modest diversification

The 3 months correlation between XFB and Eisai is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Eisai Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eisai and X FAB 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 X FAB Silicon Foundries are associated (or correlated) with Eisai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eisai has no effect on the direction of X FAB i.e., X FAB and Eisai go up and down completely randomly.

Pair Corralation between X FAB and Eisai

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to generate 1.07 times more return on investment than Eisai. However, X FAB is 1.07 times more volatile than Eisai Co. It trades about -0.06 of its potential returns per unit of risk. Eisai Co is currently generating about -0.07 per unit of risk. If you would invest  1,004  in X FAB Silicon Foundries on October 4, 2024 and sell it today you would lose (504.00) from holding X FAB Silicon Foundries or give up 50.2% of portfolio value over 90 days.

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

X FAB Silicon Foundries  vs.  Eisai Co

X FAB Silicon

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with X FAB and Eisai

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

The idea behind X FAB Silicon Foundries 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.