Correlation Between Eisai and HempAmericana

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

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

Diversification Opportunities for Eisai and HempAmericana

0.0

Correlation Coefficient

Eisai  HempAmericana

Pay attention - limited upside

The 3 months correlation between Eisai and HempAmericana is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Eisai Co and HempAmericana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HempAmericana and Eisai 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 HempAmericana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HempAmericana has no effect on the direction of Eisai i.e., Eisai and HempAmericana go up and down completely randomly.

Pair Corralation between Eisai and HempAmericana

Assuming the 90 days horizon Eisai Co is expected to generate 0.14 times more return on investment than HempAmericana. However, Eisai Co is 7.23 times less risky than HempAmericana. It trades about -0.31 of its potential returns per unit of risk. HempAmericana is currently generating about -0.13 per unit of risk. If you would invest  1,026  in Eisai Co on September 13, 2024 and sell it today you would lose (305.00) from holding Eisai Co or give up 29.73% of portfolio value over 90 days.

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

Eisai Co  vs.  HempAmericana

Eisai

Risk-Adjusted Performance

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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 weak performance in the last few months, the Stock's forward 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.

HempAmericana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HempAmericana has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Eisai and HempAmericana

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

The idea behind Eisai Co and HempAmericana 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.