Correlation Between Dairy Farm and Shionogi

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

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

Diversification Opportunities for Dairy Farm and Shionogi

0.27

Correlation Coefficient

Dairy Farm  Shionogi

Modest diversification

The 3 months correlation between Dairy and Shionogi is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and Shionogi Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shionogi and Dairy Farm 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 Dairy Farm International 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 Dairy Farm i.e., Dairy Farm and Shionogi go up and down completely randomly.

Pair Corralation between Dairy Farm and Shionogi

Assuming the 90 days trading horizon Dairy Farm International is expected to generate 2.28 times more return on investment than Shionogi. However, Dairy Farm is 2.28 times more volatile than Shionogi Co. It trades about 0.08 of its potential returns per unit of risk. Shionogi Co is currently generating about 0.06 per unit of risk. If you would invest  183.00  in Dairy Farm International on September 30, 2024 and sell it today you would earn a total of  29.00  from holding Dairy Farm International or generate 15.85% return on investment over 90 days.

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

Dairy Farm International  vs.  Shionogi Co

Dairy Farm International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dairy Farm International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Dairy Farm reported solid returns over the last few months and may actually be approaching a breakup point.

Shionogi

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shionogi Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Shionogi is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Dairy Farm and Shionogi

The main advantage of trading using opposite Dairy Farm and Shionogi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm 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 Dairy Farm International and Shionogi Co 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.