Correlation Between Shionogi and Mallinckrodt Plc

Can any of the company-specific risk be diversified away by investing in both Shionogi and Mallinckrodt 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 Mallinckrodt Plc 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 Mallinckrodt Plc, you can compare the effects of market volatilities on Shionogi and Mallinckrodt 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 Mallinckrodt Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shionogi and Mallinckrodt Plc.

Diversification Opportunities for Shionogi and Mallinckrodt Plc

0.88

Correlation Coefficient

Shionogi  Mallinckrodt Plc

Very poor diversification

The 3 months correlation between Shionogi and Mallinckrodt is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Shionogi Co Ltd and Mallinckrodt Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mallinckrodt 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 Ltd are associated (or correlated) with Mallinckrodt Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mallinckrodt Plc has no effect on the direction of Shionogi i.e., Shionogi and Mallinckrodt Plc go up and down completely randomly.

Pair Corralation between Shionogi and Mallinckrodt Plc

If you would invest  46.00  in Mallinckrodt Plc on August 30, 2024 and sell it today you would earn a total of  0.00  from holding Mallinckrodt Plc or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	1.59%
Values	Daily Returns

Shionogi Co Ltd  vs.  Mallinckrodt Plc

Shionogi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shionogi Co Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Mallinckrodt Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mallinckrodt Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Mallinckrodt Plc is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Shionogi and Mallinckrodt Plc

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

The idea behind Shionogi Co Ltd and Mallinckrodt 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.