Correlation Between Shinhan Financial and Hanwha InvestmentSecuri

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

By analyzing existing cross correlation between Shinhan Financial Group and Hanwha InvestmentSecurities Co, you can compare the effects of market volatilities on Shinhan Financial and Hanwha InvestmentSecuri 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 Shinhan Financial with a short position of Hanwha InvestmentSecuri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shinhan Financial and Hanwha InvestmentSecuri.

Diversification Opportunities for Shinhan Financial and Hanwha InvestmentSecuri

0.17

Correlation Coefficient

Shinhan Financial  Hanwha InvestmentSecuri

Average diversification

The 3 months correlation between Shinhan and Hanwha is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Hanwha InvestmentSecurities Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanwha InvestmentSecuri and Shinhan Financial 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 Shinhan Financial Group are associated (or correlated) with Hanwha InvestmentSecuri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanwha InvestmentSecuri has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Hanwha InvestmentSecuri go up and down completely randomly.

Pair Corralation between Shinhan Financial and Hanwha InvestmentSecuri

Assuming the 90 days trading horizon Shinhan Financial Group is expected to under-perform the Hanwha InvestmentSecuri. But the stock apears to be less risky and, when comparing its historical volatility, Shinhan Financial Group is 2.36 times less risky than Hanwha InvestmentSecuri. The stock trades about -0.14 of its potential returns per unit of risk. The Hanwha InvestmentSecurities Co is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  371,500  in Hanwha InvestmentSecurities Co on December 4, 2024 and sell it today you would lose (27,500) from holding Hanwha InvestmentSecurities Co or give up 7.4% of portfolio value over 90 days.

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

Shinhan Financial Group  vs.  Hanwha InvestmentSecurities Co

Shinhan Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shinhan Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hanwha InvestmentSecuri

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Shinhan Financial and Hanwha InvestmentSecuri

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

The idea behind Shinhan Financial Group and Hanwha InvestmentSecurities Co 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.