Correlation Between NH Investment and Shinhan WTI

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

By analyzing existing cross correlation between NH Investment Securities and Shinhan WTI Futures, you can compare the effects of market volatilities on NH Investment and Shinhan WTI 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 NH Investment with a short position of Shinhan WTI. Check out your portfolio center. Please also check ongoing floating volatility patterns of NH Investment and Shinhan WTI.

Diversification Opportunities for NH Investment and Shinhan WTI

0.1

Correlation Coefficient

NH Investment  Shinhan WTI

Average diversification

The 3 months correlation between 005940 and Shinhan is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding NH Investment Securities and Shinhan WTI Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinhan WTI Futures and NH Investment 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 NH Investment Securities are associated (or correlated) with Shinhan WTI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinhan WTI Futures has no effect on the direction of NH Investment i.e., NH Investment and Shinhan WTI go up and down completely randomly.

Pair Corralation between NH Investment and Shinhan WTI

Assuming the 90 days trading horizon NH Investment is expected to generate 3.14 times less return on investment than Shinhan WTI. In addition to that, NH Investment is 1.0 times more volatile than Shinhan WTI Futures. It trades about 0.04 of its total potential returns per unit of risk. Shinhan WTI Futures is currently generating about 0.12 per unit of volatility. If you would invest  740,000  in Shinhan WTI Futures on October 23, 2024 and sell it today you would earn a total of  84,000  from holding Shinhan WTI Futures or generate 11.35% return on investment over 90 days.

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

NH Investment Securities  vs.  Shinhan WTI Futures

NH Investment Securities

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NH Investment Securities are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, NH Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shinhan WTI Futures

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shinhan WTI Futures are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shinhan WTI may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with NH Investment and Shinhan WTI

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

The idea behind NH Investment Securities and Shinhan WTI Futures 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.