Correlation Between Shionogi and Swedish Orphan

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

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

Diversification Opportunities for Shionogi and Swedish Orphan

0.21

Correlation Coefficient

Shionogi  Swedish Orphan

Modest diversification

The 3 months correlation between Shionogi and Swedish is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Shionogi Co and Swedish Orphan Biovitrum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swedish Orphan Biovitrum 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 Swedish Orphan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swedish Orphan Biovitrum has no effect on the direction of Shionogi i.e., Shionogi and Swedish Orphan go up and down completely randomly.

Pair Corralation between Shionogi and Swedish Orphan

Assuming the 90 days horizon Shionogi is expected to generate 1.58 times less return on investment than Swedish Orphan. But when comparing it to its historical volatility, Shionogi Co is 1.15 times less risky than Swedish Orphan. It trades about 0.14 of its potential returns per unit of risk. Swedish Orphan Biovitrum is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,518  in Swedish Orphan Biovitrum on September 23, 2024 and sell it today you would earn a total of  130.00  from holding Swedish Orphan Biovitrum or generate 5.16% return on investment over 90 days.

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

Shionogi Co  vs.  Swedish Orphan Biovitrum

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.

Swedish Orphan Biovitrum

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Shionogi and Swedish Orphan

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

The idea behind Shionogi Co and Swedish Orphan Biovitrum 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.