Correlation Between SBI Investment and Shinhan WTI

Can any of the company-specific risk be diversified away by investing in both SBI 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 SBI 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 SBI Investment KOREA and Shinhan WTI Futures, you can compare the effects of market volatilities on SBI 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 SBI Investment with a short position of Shinhan WTI. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBI Investment and Shinhan WTI.

Diversification Opportunities for SBI Investment and Shinhan WTI

0.06

Correlation Coefficient

SBI Investment  Shinhan WTI

Significant diversification

The 3 months correlation between SBI and Shinhan is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding SBI Investment KOREA 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 SBI 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 SBI Investment KOREA 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 SBI Investment i.e., SBI Investment and Shinhan WTI go up and down completely randomly.

Pair Corralation between SBI Investment and Shinhan WTI

Assuming the 90 days trading horizon SBI Investment KOREA is expected to generate 1.78 times more return on investment than Shinhan WTI. However, SBI Investment is 1.78 times more volatile than Shinhan WTI Futures. It trades about 0.02 of its potential returns per unit of risk. Shinhan WTI Futures is currently generating about -0.01 per unit of risk. If you would invest  80,800  in SBI Investment KOREA on October 8, 2024 and sell it today you would earn a total of  1,300  from holding SBI Investment KOREA or generate 1.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.21%
Values	Daily Returns

SBI Investment KOREA  vs.  Shinhan WTI Futures

SBI Investment KOREA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SBI Investment KOREA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SBI Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Shinhan WTI Futures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shinhan WTI Futures has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shinhan WTI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SBI Investment and Shinhan WTI

The main advantage of trading using opposite SBI Investment and Shinhan WTI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBI 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 SBI Investment KOREA 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.

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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.