Correlation Between Eagle Pharmaceuticals and Centene Corp

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

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

Diversification Opportunities for Eagle Pharmaceuticals and Centene Corp

0.55

Correlation Coefficient

Eagle Pharmaceuticals  Centene Corp

Very weak diversification

The 3 months correlation between Eagle and Centene is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Pharmaceuticals and Centene Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centene Corp 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 Centene Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centene Corp has no effect on the direction of Eagle Pharmaceuticals i.e., Eagle Pharmaceuticals and Centene Corp go up and down completely randomly.

Pair Corralation between Eagle Pharmaceuticals and Centene Corp

Given the investment horizon of 90 days Eagle Pharmaceuticals is expected to under-perform the Centene Corp. In addition to that, Eagle Pharmaceuticals is 3.04 times more volatile than Centene Corp. It trades about -0.15 of its total potential returns per unit of risk. Centene Corp is currently generating about -0.11 per unit of volatility. If you would invest  7,966  in Centene Corp on March 7, 2024 and sell it today you would lose (952.00) from holding Centene Corp or give up 11.95% of portfolio value over 90 days.

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

Eagle Pharmaceuticals  vs.  Centene Corp

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 unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Centene Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centene Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Eagle Pharmaceuticals and Centene Corp

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

The idea behind Eagle Pharmaceuticals and Centene Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.