Correlation Between Catalent and Shionogi

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

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

Diversification Opportunities for Catalent and Shionogi

0.04

Correlation Coefficient

Catalent  Shionogi

Significant diversification

The 3 months correlation between Catalent and Shionogi is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and Shionogi Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shionogi and Catalent 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 Catalent are associated (or correlated) with Shionogi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shionogi has no effect on the direction of Catalent i.e., Catalent and Shionogi go up and down completely randomly.

Pair Corralation between Catalent and Shionogi

Given the investment horizon of 90 days Catalent is expected to generate 1.23 times more return on investment than Shionogi. However, Catalent is 1.23 times more volatile than Shionogi Co Ltd. It trades about 0.11 of its potential returns per unit of risk. Shionogi Co Ltd is currently generating about -0.01 per unit of risk. If you would invest  5,041  in Catalent on January 25, 2024 and sell it today you would earn a total of  562.00  from holding Catalent or generate 11.15% return on investment over 90 days.

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

Catalent  vs.  Shionogi Co Ltd

Catalent

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal essential indicators, Catalent may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Shionogi

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Catalent and Shionogi

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

The idea behind Catalent and Shionogi Co Ltd 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.