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

0.62

Correlation Coefficient

Shionogi  Shanghai Fosun

Poor diversification

The 3 months correlation between Shionogi and Shanghai is 0.62. 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 under-perform the Shanghai Fosun. In addition to that, Shionogi is 1.77 times more volatile than Shanghai Fosun Pharmaceutical. It trades about -0.15 of its total potential returns per unit of risk. Shanghai Fosun Pharmaceutical is currently generating about -0.09 per unit of volatility. If you would invest  158.00  in Shanghai Fosun Pharmaceutical on February 3, 2024 and sell it today you would lose (3.00) from holding Shanghai Fosun Pharmaceutical or give up 1.9% of portfolio value over 90 days.

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

Shionogi Co Ltd  vs.  Shanghai Fosun Pharmaceutical

Shionogi

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shionogi Co Ltd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

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 latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..