Correlation Between Shionogi and Cresco Labs

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

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

Diversification Opportunities for Shionogi and Cresco Labs

-0.71

Correlation Coefficient

Shionogi  Cresco Labs

Pay attention - limited upside

The 3 months correlation between Shionogi and Cresco is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Shionogi Co Ltd and Cresco Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cresco Labs 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 Ltd are associated (or correlated) with Cresco Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cresco Labs has no effect on the direction of Shionogi i.e., Shionogi and Cresco Labs go up and down completely randomly.

Pair Corralation between Shionogi and Cresco Labs

Assuming the 90 days horizon Shionogi Co Ltd is expected to generate 0.37 times more return on investment than Cresco Labs. However, Shionogi Co Ltd is 2.68 times less risky than Cresco Labs. It trades about 0.08 of its potential returns per unit of risk. Cresco Labs is currently generating about 0.0 per unit of risk. If you would invest  701.00  in Shionogi Co Ltd on December 27, 2024 and sell it today you would earn a total of  67.00  from holding Shionogi Co Ltd or generate 9.56% return on investment over 90 days.

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

Shionogi Co Ltd  vs.  Cresco Labs

Shionogi

Risk-Adjusted Performance

Modest

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

Cresco Labs

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cresco Labs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Cresco Labs 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 Cresco Labs

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

The idea behind Shionogi Co Ltd and Cresco Labs 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.