Correlation Between Mallinckrodt Plc and Eagle Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Mallinckrodt Plc and Eagle Pharmaceuticals 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 Mallinckrodt Plc and Eagle Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mallinckrodt Plc and Eagle Pharmaceuticals, you can compare the effects of market volatilities on Mallinckrodt Plc and Eagle Pharmaceuticals 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 Mallinckrodt Plc with a short position of Eagle Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mallinckrodt Plc and Eagle Pharmaceuticals.
Diversification Opportunities for Mallinckrodt Plc and Eagle Pharmaceuticals
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mallinckrodt and Eagle is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Mallinckrodt Plc and Eagle Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Pharmaceuticals and Mallinckrodt Plc 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 Mallinckrodt Plc are associated (or correlated) with Eagle Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Pharmaceuticals has no effect on the direction of Mallinckrodt Plc i.e., Mallinckrodt Plc and Eagle Pharmaceuticals go up and down completely randomly.
Pair Corralation between Mallinckrodt Plc and Eagle Pharmaceuticals
Considering the 90-day investment horizon Mallinckrodt Plc is expected to under-perform the Eagle Pharmaceuticals. In addition to that, Mallinckrodt Plc is 1.35 times more volatile than Eagle Pharmaceuticals. It trades about -0.74 of its total potential returns per unit of risk. Eagle Pharmaceuticals is currently generating about -0.1 per unit of volatility. If you would invest 1,994 in Eagle Pharmaceuticals on August 28, 2024 and sell it today you would lose (1,795) from holding Eagle Pharmaceuticals or give up 90.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 4.73% |
| Values | Daily Returns |
Mallinckrodt Plc vs. Eagle Pharmaceuticals
Performance |
| Timeline |
| Mallinckrodt Plc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Eagle Pharmaceuticals |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Mallinckrodt Plc and Eagle Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mallinckrodt Plc and Eagle Pharmaceuticals
The main advantage of trading using opposite Mallinckrodt Plc and Eagle Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mallinckrodt Plc position performs unexpectedly, Eagle Pharmaceuticals 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 Eagle Pharmaceuticals will offset losses from the drop in Eagle Pharmaceuticals' long position.| Mallinckrodt Plc vs. Lifecore Biomedical | Mallinckrodt Plc vs. Shuttle Pharmaceuticals | Mallinckrodt Plc vs. Organogenesis Holdings | Mallinckrodt Plc vs. Journey Medical Corp |
| Eagle Pharmaceuticals vs. ANI Pharmaceuticals | Eagle Pharmaceuticals vs. Phibro Animal Health | Eagle Pharmaceuticals vs. Prestige Brand Holdings | Eagle Pharmaceuticals vs. Collegium Pharmaceutical |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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