Correlation Between Eagle Pharmaceuticals and Pacira Pharmaceuticals

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

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

Diversification Opportunities for Eagle Pharmaceuticals and Pacira Pharmaceuticals

0.8

Correlation Coefficient

Eagle Pharmaceuticals  Pacira Pharmaceuticals

Very poor diversification

The 3 months correlation between Eagle and Pacira is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Pharmaceuticals and Pacira Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacira Pharmaceuticals and Eagle Pharmaceuticals 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 Eagle Pharmaceuticals are associated (or correlated) with Pacira Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacira Pharmaceuticals has no effect on the direction of Eagle Pharmaceuticals i.e., Eagle Pharmaceuticals and Pacira Pharmaceuticals go up and down completely randomly.

Pair Corralation between Eagle Pharmaceuticals and Pacira Pharmaceuticals

Given the investment horizon of 90 days Eagle Pharmaceuticals is expected to under-perform the Pacira Pharmaceuticals. In addition to that, Eagle Pharmaceuticals is 2.64 times more volatile than Pacira Pharmaceuticals. It trades about -0.01 of its total potential returns per unit of risk. Pacira Pharmaceuticals is currently generating about -0.03 per unit of volatility. If you would invest  2,770  in Pacira Pharmaceuticals on February 8, 2024 and sell it today you would lose (119.00) from holding Pacira Pharmaceuticals or give up 4.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Eagle Pharmaceuticals  vs.  Pacira Pharmaceuticals

Eagle Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eagle Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Eagle Pharmaceuticals is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pacira Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacira Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Pacira Pharmaceuticals is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eagle Pharmaceuticals and Pacira Pharmaceuticals

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

The idea behind Eagle Pharmaceuticals and Pacira Pharmaceuticals 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.