Correlation Between Daiichi Sankyo and Astellas Pharma

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

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

Diversification Opportunities for Daiichi Sankyo and Astellas Pharma

0.76

Correlation Coefficient

Daiichi Sankyo  Astellas Pharma

Poor diversification

The 3 months correlation between Daiichi and Astellas is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Daiichi Sankyo and Astellas Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astellas Pharma and Daiichi Sankyo 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 Daiichi Sankyo are associated (or correlated) with Astellas Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astellas Pharma has no effect on the direction of Daiichi Sankyo i.e., Daiichi Sankyo and Astellas Pharma go up and down completely randomly.

Pair Corralation between Daiichi Sankyo and Astellas Pharma

Assuming the 90 days horizon Daiichi Sankyo is expected to generate 3.55 times more return on investment than Astellas Pharma. However, Daiichi Sankyo is 3.55 times more volatile than Astellas Pharma. It trades about 0.01 of its potential returns per unit of risk. Astellas Pharma is currently generating about -0.12 per unit of risk. If you would invest  3,498  in Daiichi Sankyo on September 5, 2024 and sell it today you would lose (233.00) from holding Daiichi Sankyo or give up 6.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Daiichi Sankyo  vs.  Astellas Pharma

Daiichi Sankyo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daiichi Sankyo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Daiichi Sankyo is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Astellas Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Astellas Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Daiichi Sankyo and Astellas Pharma

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

The idea behind Daiichi Sankyo and Astellas 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.