Correlation Between Eton Pharmaceuticals and DaVita HealthCare

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

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

Diversification Opportunities for Eton Pharmaceuticals and DaVita HealthCare

-0.45

Correlation Coefficient

Eton Pharmaceuticals  DaVita HealthCare

Very good diversification

The 3 months correlation between Eton and DaVita is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Eton Pharmaceuticals and DaVita HealthCare Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DaVita HealthCare 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 DaVita HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DaVita HealthCare has no effect on the direction of Eton Pharmaceuticals i.e., Eton Pharmaceuticals and DaVita HealthCare go up and down completely randomly.

Pair Corralation between Eton Pharmaceuticals and DaVita HealthCare

Given the investment horizon of 90 days Eton Pharmaceuticals is expected to generate 1.86 times more return on investment than DaVita HealthCare. However, Eton Pharmaceuticals is 1.86 times more volatile than DaVita HealthCare Partners. It trades about 0.14 of its potential returns per unit of risk. DaVita HealthCare Partners is currently generating about 0.13 per unit of risk. If you would invest  322.00  in Eton Pharmaceuticals on February 14, 2024 and sell it today you would earn a total of  33.00  from holding Eton Pharmaceuticals or generate 10.25% return on investment over 90 days.

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

Eton Pharmaceuticals  vs.  DaVita HealthCare Partners

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 weak 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.

DaVita HealthCare

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DaVita HealthCare Partners are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DaVita HealthCare may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Eton Pharmaceuticals and DaVita HealthCare

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

The idea behind Eton Pharmaceuticals and DaVita HealthCare Partners 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.