Correlation Between Eton Pharmaceuticals and Elite Pharma

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

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

Diversification Opportunities for Eton Pharmaceuticals and Elite Pharma

-0.81

Correlation Coefficient

Eton Pharmaceuticals  Elite Pharma

Pay attention - limited upside

The 3 months correlation between Eton and Elite is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Eton Pharmaceuticals and Elite Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elite Pharma and Eton 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 Eton Pharmaceuticals are associated (or correlated) with Elite Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elite Pharma has no effect on the direction of Eton Pharmaceuticals i.e., Eton Pharmaceuticals and Elite Pharma go up and down completely randomly.

Pair Corralation between Eton Pharmaceuticals and Elite Pharma

If you would invest  14.00  in Elite Pharma on February 16, 2024 and sell it today you would earn a total of  0.00  from holding Elite Pharma or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

Eton Pharmaceuticals  vs.  Elite Pharma

Eton Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eton Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Elite Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elite Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Elite Pharma is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Eton Pharmaceuticals and Elite Pharma

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

The idea behind Eton Pharmaceuticals and Elite Pharma 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.