Correlation Between Eisai Co and Applied Materials

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

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

Diversification Opportunities for Eisai Co and Applied Materials

-0.72

Correlation Coefficient

Eisai Co  Applied Materials

Pay attention - limited upside

The 3 months correlation between Eisai and Applied is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Eisai Co and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Eisai Co i.e., Eisai Co and Applied Materials go up and down completely randomly.

Pair Corralation between Eisai Co and Applied Materials

Assuming the 90 days horizon Eisai Co is expected to under-perform the Applied Materials. But the stock apears to be less risky and, when comparing its historical volatility, Eisai Co is 1.01 times less risky than Applied Materials. The stock trades about -0.06 of its potential returns per unit of risk. The Applied Materials is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  12,509  in Applied Materials on April 23, 2025 and sell it today you would earn a total of  4,049  from holding Applied Materials or generate 32.37% return on investment over 90 days.

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

Eisai Co  vs.  Applied Materials

Eisai Co

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eisai Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Applied Materials

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Applied Materials reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eisai Co and Applied Materials

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

The idea behind Eisai Co and Applied Materials 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.