Correlation Between Eagle Pharmaceuticals and Procaps Group

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

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

Diversification Opportunities for Eagle Pharmaceuticals and Procaps Group

0.33

Correlation Coefficient

Eagle Pharmaceuticals  Procaps Group

Weak diversification

The 3 months correlation between Eagle and Procaps is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Pharmaceuticals and Procaps Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procaps Group SA and Eagle Pharmaceuticals 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 Eagle Pharmaceuticals are associated (or correlated) with Procaps Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procaps Group SA has no effect on the direction of Eagle Pharmaceuticals i.e., Eagle Pharmaceuticals and Procaps Group go up and down completely randomly.

Pair Corralation between Eagle Pharmaceuticals and Procaps Group

Given the investment horizon of 90 days Eagle Pharmaceuticals is expected to under-perform the Procaps Group. But the pink sheet apears to be less risky and, when comparing its historical volatility, Eagle Pharmaceuticals is 1.84 times less risky than Procaps Group. The pink sheet trades about -0.33 of its potential returns per unit of risk. The Procaps Group SA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  183.00  in Procaps Group SA on September 4, 2024 and sell it today you would lose (20.00) from holding Procaps Group SA or give up 10.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	35.94%
Values	Daily Returns

Eagle Pharmaceuticals  vs.  Procaps Group SA

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.

Procaps Group SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Procaps Group SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Procaps Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eagle Pharmaceuticals and Procaps Group

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

The idea behind Eagle Pharmaceuticals and Procaps Group SA 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.