Correlation Between Eisai Co and Volkswagen
Can any of the company-specific risk be diversified away by investing in both Eisai Co and Volkswagen 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 Co and Volkswagen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eisai Co and Volkswagen AG, you can compare the effects of market volatilities on Eisai Co and Volkswagen 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 Co with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eisai Co and Volkswagen.
Diversification Opportunities for Eisai Co and Volkswagen
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eisai and Volkswagen is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Eisai Co and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and Eisai Co 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 Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG has no effect on the direction of Eisai Co i.e., Eisai Co and Volkswagen go up and down completely randomly.
Pair Corralation between Eisai Co and Volkswagen
Assuming the 90 days horizon Eisai Co is expected to under-perform the Volkswagen. In addition to that, Eisai Co is 1.48 times more volatile than Volkswagen AG. It trades about -0.05 of its total potential returns per unit of risk. Volkswagen AG is currently generating about -0.05 per unit of volatility. If you would invest 13,622 in Volkswagen AG on September 3, 2024 and sell it today you would lose (5,317) from holding Volkswagen AG or give up 39.03% 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. Volkswagen AG
Performance |
| Timeline |
| Eisai Co |
| Volkswagen AG |
Eisai Co and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eisai Co and Volkswagen
The main advantage of trading using opposite Eisai Co and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eisai Co position performs unexpectedly, Volkswagen 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 Volkswagen will offset losses from the drop in Volkswagen's long position.| Eisai Co vs. NorAm Drilling AS | Eisai Co vs. CompuGroup Medical SE | Eisai Co vs. 24SEVENOFFICE GROUP AB | Eisai Co vs. Beazer Homes USA |
| Volkswagen vs. Hemisphere Energy Corp | Volkswagen vs. Microbot Medical | Volkswagen vs. Air Lease | Volkswagen vs. Chunghwa Telecom Co |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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