Correlation Between Zoetis and Eagle Pharmaceuticals

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

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

Diversification Opportunities for Zoetis and Eagle Pharmaceuticals

0.78

Correlation Coefficient

Zoetis  Eagle Pharmaceuticals

Poor diversification

The 3 months correlation between Zoetis and Eagle is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Zoetis Inc and Eagle Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Pharmaceuticals and Zoetis 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 Zoetis Inc are associated (or correlated) with Eagle Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Pharmaceuticals has no effect on the direction of Zoetis i.e., Zoetis and Eagle Pharmaceuticals go up and down completely randomly.

Pair Corralation between Zoetis and Eagle Pharmaceuticals

If you would invest  199.00  in Eagle Pharmaceuticals on September 22, 2024 and sell it today you would earn a total of  0.00  from holding Eagle Pharmaceuticals or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.76%
Values	Daily Returns

Zoetis Inc  vs.  Eagle Pharmaceuticals

Zoetis Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zoetis Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Eagle Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eagle Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Zoetis and Eagle Pharmaceuticals

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

The idea behind Zoetis Inc and Eagle Pharmaceuticals 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.