Correlation Between Shionogi and Allied Corp

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

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

Diversification Opportunities for Shionogi and Allied Corp

-0.37

Correlation Coefficient

Shionogi  Allied Corp

Very good diversification

The 3 months correlation between Shionogi and Allied is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Shionogi Co Ltd and Allied Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Corp and Shionogi 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 Shionogi Co Ltd are associated (or correlated) with Allied Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Corp has no effect on the direction of Shionogi i.e., Shionogi and Allied Corp go up and down completely randomly.

Pair Corralation between Shionogi and Allied Corp

Assuming the 90 days horizon Shionogi Co Ltd is expected to under-perform the Allied Corp. But the pink sheet apears to be less risky and, when comparing its historical volatility, Shionogi Co Ltd is 8.78 times less risky than Allied Corp. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Allied Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  75.00  in Allied Corp on January 24, 2024 and sell it today you would lose (58.00) from holding Allied Corp or give up 77.33% of portfolio value over 90 days.

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

Shionogi Co Ltd  vs.  Allied Corp

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.

Allied Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allied Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward indicators, Allied Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shionogi and Allied Corp

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

The idea behind Shionogi Co Ltd and Allied 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.