Correlation Between US Lithium and Eisai

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

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

Diversification Opportunities for US Lithium and Eisai

0.21

Correlation Coefficient

US Lithium  Eisai

Modest diversification

The 3 months correlation between LITH and Eisai is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding US Lithium Corp and Eisai Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eisai and US Lithium 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 US Lithium Corp are associated (or correlated) with Eisai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eisai has no effect on the direction of US Lithium i.e., US Lithium and Eisai go up and down completely randomly.

Pair Corralation between US Lithium and Eisai

Given the investment horizon of 90 days US Lithium Corp is expected to under-perform the Eisai. In addition to that, US Lithium is 11.77 times more volatile than Eisai Co. It trades about -0.22 of its total potential returns per unit of risk. Eisai Co is currently generating about -0.33 per unit of volatility. If you would invest  772.00  in Eisai Co on September 19, 2024 and sell it today you would lose (73.00) from holding Eisai Co or give up 9.46% of portfolio value over 90 days.

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

US Lithium Corp  vs.  Eisai Co

US Lithium Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US Lithium Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite 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 recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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. 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.

Pair Trading with US Lithium and Eisai

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

The idea behind US Lithium Corp and Eisai Co 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.