Correlation Between Eisai and Ipsen SA
Can any of the company-specific risk be diversified away by investing in both Eisai and Ipsen SA 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 Ipsen SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eisai Co and Ipsen SA, you can compare the effects of market volatilities on Eisai and Ipsen SA 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 Ipsen SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eisai and Ipsen SA.
Diversification Opportunities for Eisai and Ipsen SA
Very weak diversification
The 3 months correlation between Eisai and Ipsen is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Eisai Co and Ipsen SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ipsen SA 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 Ipsen SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ipsen SA has no effect on the direction of Eisai i.e., Eisai and Ipsen SA go up and down completely randomly.
Pair Corralation between Eisai and Ipsen SA
Assuming the 90 days horizon Eisai Co is expected to under-perform the Ipsen SA. In addition to that, Eisai is 1.6 times more volatile than Ipsen SA. It trades about -0.05 of its total potential returns per unit of risk. Ipsen SA is currently generating about 0.02 per unit of volatility. If you would invest 9,679 in Ipsen SA on September 26, 2024 and sell it today you would earn a total of 1,051 from holding Ipsen SA or generate 10.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eisai Co vs. Ipsen SA
Performance |
| Timeline |
| Eisai |
| Ipsen SA |
Eisai and Ipsen SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eisai and Ipsen SA
The main advantage of trading using opposite Eisai and Ipsen SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eisai position performs unexpectedly, Ipsen SA 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 Ipsen SA will offset losses from the drop in Ipsen SA's long position.| Eisai vs. Zoetis Inc | Eisai vs. Takeda Pharmaceutical | Eisai vs. Catalent | Eisai vs. Teva Pharmaceutical Industries |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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