Correlation Between Eisai and Curative Biosciences

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

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

Diversification Opportunities for Eisai and Curative Biosciences

0.0

Correlation Coefficient

Eisai  Curative Biosciences

Pay attention - limited upside

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

Pair Corralation between Eisai and Curative Biosciences

Assuming the 90 days horizon Eisai Co is expected to under-perform the Curative Biosciences. But the pink sheet apears to be less risky and, when comparing its historical volatility, Eisai Co is 2.9 times less risky than Curative Biosciences. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Curative Biosciences is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  0.21  in Curative Biosciences on September 19, 2024 and sell it today you would lose (0.20) from holding Curative Biosciences or give up 95.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	94.55%
Values	Daily Returns

Eisai Co  vs.  Curative Biosciences

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. Despite inconsistent performance in the last few months, the Stock's essential 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.

Curative Biosciences

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Curative Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Curative Biosciences is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eisai and Curative Biosciences

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

The idea behind Eisai Co and Curative Biosciences 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.