Correlation Between Shanghai Fosun and Shionogi

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

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

Diversification Opportunities for Shanghai Fosun and Shionogi

0.46

Correlation Coefficient

Shanghai Fosun  Shionogi

Very weak diversification

The 3 months correlation between Shanghai and Shionogi is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Fosun Pharmaceutical and Shionogi Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shionogi and Shanghai Fosun 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 Shanghai Fosun Pharmaceutical 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 Shanghai Fosun i.e., Shanghai Fosun and Shionogi go up and down completely randomly.

Pair Corralation between Shanghai Fosun and Shionogi

Assuming the 90 days horizon Shanghai Fosun Pharmaceutical is expected to generate 1.18 times more return on investment than Shionogi. However, Shanghai Fosun is 1.18 times more volatile than Shionogi Co Ltd. It trades about -0.26 of its potential returns per unit of risk. Shionogi Co Ltd is currently generating about -0.34 per unit of risk. If you would invest  167.00  in Shanghai Fosun Pharmaceutical on January 24, 2024 and sell it today you would lose (14.00) from holding Shanghai Fosun Pharmaceutical or give up 8.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Shanghai Fosun Pharmaceutical  vs.  Shionogi Co Ltd

Shanghai Fosun Pharm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai Fosun Pharmaceutical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shanghai Fosun and Shionogi

The main advantage of trading using opposite Shanghai Fosun and Shionogi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shanghai Fosun 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 Shanghai Fosun Pharmaceutical 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.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.