Correlation Between Shionogi and Catalent

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

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

Diversification Opportunities for Shionogi and Catalent

0.36

Correlation Coefficient

Shionogi  Catalent

Weak diversification

The 3 months correlation between Shionogi and Catalent is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Shionogi Co and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent 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 Catalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalent has no effect on the direction of Shionogi i.e., Shionogi and Catalent go up and down completely randomly.

Pair Corralation between Shionogi and Catalent

Assuming the 90 days horizon Shionogi Co is expected to under-perform the Catalent. In addition to that, Shionogi is 3.43 times more volatile than Catalent. It trades about -0.01 of its total potential returns per unit of risk. Catalent is currently generating about 0.22 per unit of volatility. If you would invest  5,343  in Catalent on September 23, 2024 and sell it today you would earn a total of  650.00  from holding Catalent or generate 12.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.97%
Values	Daily Returns

Shionogi Co  vs.  Catalent

Shionogi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shionogi Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Shionogi is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Catalent

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Catalent may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Shionogi and Catalent

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

The idea behind Shionogi Co and Catalent 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.