Correlation Between Santen Pharmaceutical and Ono Pharmaceutical

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

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

Diversification Opportunities for Santen Pharmaceutical and Ono Pharmaceutical

0.53

Correlation Coefficient

Santen Pharmaceutical  Ono Pharmaceutical

Very weak diversification

The 3 months correlation between Santen and Ono is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Santen Pharmaceutical Co and Ono Pharmaceutical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ono Pharmaceutical and Santen Pharmaceutical 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 Santen Pharmaceutical Co are associated (or correlated) with Ono Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ono Pharmaceutical has no effect on the direction of Santen Pharmaceutical i.e., Santen Pharmaceutical and Ono Pharmaceutical go up and down completely randomly.

Pair Corralation between Santen Pharmaceutical and Ono Pharmaceutical

Assuming the 90 days horizon Santen Pharmaceutical Co is expected to generate 1.39 times more return on investment than Ono Pharmaceutical. However, Santen Pharmaceutical is 1.39 times more volatile than Ono Pharmaceutical Co. It trades about -0.02 of its potential returns per unit of risk. Ono Pharmaceutical Co is currently generating about -0.2 per unit of risk. If you would invest  1,109  in Santen Pharmaceutical Co on September 15, 2024 and sell it today you would lose (56.00) from holding Santen Pharmaceutical Co or give up 5.05% of portfolio value over 90 days.

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

Santen Pharmaceutical Co  vs.  Ono Pharmaceutical Co

Santen Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Santen Pharmaceutical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Santen Pharmaceutical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Ono Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ono Pharmaceutical 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 essential 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 Santen Pharmaceutical and Ono Pharmaceutical

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

The idea behind Santen Pharmaceutical Co and Ono Pharmaceutical 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.