Correlation Between Eisai and Livewire Ergogenics

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

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

Diversification Opportunities for Eisai and Livewire Ergogenics

0.79

Correlation Coefficient

Eisai  Livewire Ergogenics

Poor diversification

The 3 months correlation between Eisai and Livewire is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Eisai Co and Livewire Ergogenics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Livewire Ergogenics 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 Livewire Ergogenics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Livewire Ergogenics has no effect on the direction of Eisai i.e., Eisai and Livewire Ergogenics go up and down completely randomly.

Pair Corralation between Eisai and Livewire Ergogenics

Assuming the 90 days horizon Eisai Co is expected to under-perform the Livewire Ergogenics. But the pink sheet apears to be less risky and, when comparing its historical volatility, Eisai Co is 2.93 times less risky than Livewire Ergogenics. The pink sheet trades about -0.25 of its potential returns per unit of risk. The Livewire Ergogenics is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  0.08  in Livewire Ergogenics on September 12, 2024 and sell it today you would lose (0.01) from holding Livewire Ergogenics or give up 12.5% of portfolio value over 90 days.

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

Eisai Co  vs.  Livewire Ergogenics

Eisai

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 fragile 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.

Livewire Ergogenics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Livewire Ergogenics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Eisai and Livewire Ergogenics

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

The idea behind Eisai Co and Livewire Ergogenics 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.