Correlation Between Sea and Eisai

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

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

Diversification Opportunities for Sea and Eisai

-0.91

Correlation Coefficient

Sea  Eisai

Pay attention - limited upside

The 3 months correlation between Sea and Eisai is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Sea and Eisai Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eisai and Sea 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 Sea 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 Sea i.e., Sea and Eisai go up and down completely randomly.

Pair Corralation between Sea and Eisai

Allowing for the 90-day total investment horizon Sea is expected to generate 1.41 times more return on investment than Eisai. However, Sea is 1.41 times more volatile than Eisai Co. It trades about 0.19 of its potential returns per unit of risk. Eisai Co is currently generating about -0.32 per unit of risk. If you would invest  8,501  in Sea on September 19, 2024 and sell it today you would earn a total of  2,598  from holding Sea or generate 30.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Sea  vs.  Eisai Co

Sea

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sea exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 Sea and Eisai

The main advantage of trading using opposite Sea and Eisai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sea 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 Sea 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.