Correlation Between Eisai Co and Ipsen SA

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

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

Diversification Opportunities for Eisai Co and Ipsen SA

-0.22

Correlation Coefficient

Eisai Co  Ipsen SA

Very good diversification

The 3 months correlation between Eisai and Ipsen is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Eisai Co and Ipsen SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ipsen SA and Eisai Co 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 Eisai Co are associated (or correlated) with Ipsen SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ipsen SA has no effect on the direction of Eisai Co i.e., Eisai Co and Ipsen SA go up and down completely randomly.

Pair Corralation between Eisai Co and Ipsen SA

Assuming the 90 days horizon Eisai Co is expected to under-perform the Ipsen SA. In addition to that, Eisai Co is 1.94 times more volatile than Ipsen SA. It trades about -0.11 of its total potential returns per unit of risk. Ipsen SA is currently generating about 0.0 per unit of volatility. If you would invest  10,910  in Ipsen SA on September 3, 2024 and sell it today you would lose (20.00) from holding Ipsen SA or give up 0.18% of portfolio value over 90 days.

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

Eisai Co  vs.  Ipsen SA

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

Ipsen SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ipsen SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ipsen SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Eisai Co and Ipsen SA

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

The idea behind Eisai Co and Ipsen 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.