Correlation Between Shionogi and ALX Resources

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

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

Diversification Opportunities for Shionogi and ALX Resources

-0.43

Correlation Coefficient

Shionogi  ALX Resources

Very good diversification

The 3 months correlation between Shionogi and ALX is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Shionogi Co and ALX Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALX Resources 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 are associated (or correlated) with ALX Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALX Resources Corp has no effect on the direction of Shionogi i.e., Shionogi and ALX Resources go up and down completely randomly.

Pair Corralation between Shionogi and ALX Resources

Assuming the 90 days horizon Shionogi Co is expected to generate 3.97 times more return on investment than ALX Resources. However, Shionogi is 3.97 times more volatile than ALX Resources Corp. It trades about 0.19 of its potential returns per unit of risk. ALX Resources Corp is currently generating about 0.08 per unit of risk. If you would invest  1,298  in Shionogi Co on September 15, 2024 and sell it today you would earn a total of  112.00  from holding Shionogi Co or generate 8.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.21%
Values	Daily Returns

Shionogi Co  vs.  ALX Resources Corp

Shionogi

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shionogi Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Shionogi reported solid returns over the last few months and may actually be approaching a breakup point.

ALX Resources Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ALX Resources Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, ALX Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shionogi and ALX Resources

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

The idea behind Shionogi Co and ALX Resources 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.