Correlation Between Takeda Pharmaceutical and Eurotech SpA

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

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

Diversification Opportunities for Takeda Pharmaceutical and Eurotech SpA

-0.4

Correlation Coefficient

Takeda Pharmaceutical  Eurotech SpA

Very good diversification

The 3 months correlation between Takeda and Eurotech is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Takeda Pharmaceutical and Eurotech SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eurotech SpA and Takeda 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 Takeda Pharmaceutical are associated (or correlated) with Eurotech SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eurotech SpA has no effect on the direction of Takeda Pharmaceutical i.e., Takeda Pharmaceutical and Eurotech SpA go up and down completely randomly.

Pair Corralation between Takeda Pharmaceutical and Eurotech SpA

Assuming the 90 days trading horizon Takeda Pharmaceutical is expected to under-perform the Eurotech SpA. But the stock apears to be less risky and, when comparing its historical volatility, Takeda Pharmaceutical is 1.98 times less risky than Eurotech SpA. The stock trades about -0.04 of its potential returns per unit of risk. The Eurotech SpA is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  64.00  in Eurotech SpA on April 22, 2025 and sell it today you would earn a total of  24.00  from holding Eurotech SpA or generate 37.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Takeda Pharmaceutical  vs.  Eurotech SpA

Takeda Pharmaceutical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Takeda Pharmaceutical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Takeda Pharmaceutical is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Eurotech SpA

Risk-Adjusted Performance

Good

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

Pair Trading with Takeda Pharmaceutical and Eurotech SpA

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

The idea behind Takeda Pharmaceutical and Eurotech SpA 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.