Correlation Between Shionogi and Haleon Plc

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

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

Diversification Opportunities for Shionogi and Haleon Plc

0.69

Correlation Coefficient

Shionogi  Haleon Plc

Poor diversification

The 3 months correlation between Shionogi and Haleon is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Shionogi Co and Haleon plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haleon plc 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 Haleon Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haleon plc has no effect on the direction of Shionogi i.e., Shionogi and Haleon Plc go up and down completely randomly.

Pair Corralation between Shionogi and Haleon Plc

Assuming the 90 days horizon Shionogi Co is expected to generate 31.35 times more return on investment than Haleon Plc. However, Shionogi is 31.35 times more volatile than Haleon plc. It trades about 0.04 of its potential returns per unit of risk. Haleon plc is currently generating about -0.13 per unit of risk. If you would invest  4,550  in Shionogi Co on September 18, 2024 and sell it today you would lose (3,133) from holding Shionogi Co or give up 68.86% of portfolio value over 90 days.

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

Shionogi Co  vs.  Haleon plc

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.

Haleon plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Haleon plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Shionogi and Haleon Plc

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

The idea behind Shionogi Co and Haleon plc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.