Correlation Between Gold Road and SHIONOGI

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

By analyzing existing cross correlation between Gold Road Resources and SHIONOGI LTD, you can compare the effects of market volatilities on Gold Road 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 Gold Road with a short position of SHIONOGI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Road and SHIONOGI.

Diversification Opportunities for Gold Road and SHIONOGI

0.69

Correlation Coefficient

Gold Road  SHIONOGI

Poor diversification

The 3 months correlation between Gold and SHIONOGI is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Gold Road Resources and SHIONOGI LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHIONOGI LTD and Gold Road 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 Gold Road Resources 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 LTD has no effect on the direction of Gold Road i.e., Gold Road and SHIONOGI go up and down completely randomly.

Pair Corralation between Gold Road and SHIONOGI

Assuming the 90 days horizon Gold Road Resources is expected to under-perform the SHIONOGI. In addition to that, Gold Road is 1.3 times more volatile than SHIONOGI LTD. It trades about -0.11 of its total potential returns per unit of risk. SHIONOGI LTD is currently generating about -0.06 per unit of volatility. If you would invest  1,370  in SHIONOGI LTD on October 10, 2024 and sell it today you would lose (20.00) from holding SHIONOGI LTD or give up 1.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.44%
Values	Daily Returns

Gold Road Resources  vs.  SHIONOGI LTD

Gold Road Resources

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Road Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gold Road reported solid returns over the last few months and may actually be approaching a breakup point.

SHIONOGI LTD

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SHIONOGI LTD are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, SHIONOGI may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Gold Road and SHIONOGI

The main advantage of trading using opposite Gold Road and SHIONOGI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Road 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 Gold Road Resources and SHIONOGI LTD 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.