Correlation Between Shionogi and Shanghai Fosun

Can any of the company-specific risk be diversified away by investing in both Shionogi and Shanghai Fosun 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 Shanghai Fosun 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 Shanghai Fosun Pharmaceutical, you can compare the effects of market volatilities on Shionogi and Shanghai Fosun 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 Shanghai Fosun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shionogi and Shanghai Fosun.

Diversification Opportunities for Shionogi and Shanghai Fosun

0.38

Correlation Coefficient

Shionogi  Shanghai Fosun

Weak diversification

The 3 months correlation between Shionogi and Shanghai is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Shionogi Co Ltd and Shanghai Fosun Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Fosun Pharm 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 Shanghai Fosun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Fosun Pharm has no effect on the direction of Shionogi i.e., Shionogi and Shanghai Fosun go up and down completely randomly.

Pair Corralation between Shionogi and Shanghai Fosun

Assuming the 90 days horizon Shionogi Co Ltd is expected to generate 0.53 times more return on investment than Shanghai Fosun. However, Shionogi Co Ltd is 1.88 times less risky than Shanghai Fosun. It trades about -0.02 of its potential returns per unit of risk. Shanghai Fosun Pharmaceutical is currently generating about -0.05 per unit of risk. If you would invest  1,379  in Shionogi Co Ltd on January 20, 2024 and sell it today you would lose (235.00) from holding Shionogi Co Ltd or give up 17.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.78%
Values	Daily Returns

Shionogi Co Ltd  vs.  Shanghai Fosun Pharmaceutical

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 weak 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.

Pair Trading with Shionogi and Shanghai Fosun

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

The idea behind Shionogi Co Ltd and Shanghai Fosun Pharmaceutical 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.