Correlation Between Shinhan Financial and Sajo Seafood

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

Diversification Opportunities for Shinhan Financial and Sajo Seafood

-0.35

Correlation Coefficient

Shinhan Financial  Sajo Seafood

Very good diversification

The 3 months correlation between Shinhan and Sajo is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Sajo Seafood in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sajo Seafood 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 Sajo Seafood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sajo Seafood has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Sajo Seafood go up and down completely randomly.

Pair Corralation between Shinhan Financial and Sajo Seafood

Assuming the 90 days trading horizon Shinhan Financial is expected to generate 16.49 times less return on investment than Sajo Seafood. But when comparing it to its historical volatility, Shinhan Financial Group is 3.4 times less risky than Sajo Seafood. It trades about 0.01 of its potential returns per unit of risk. Sajo Seafood is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  469,000  in Sajo Seafood on December 25, 2024 and sell it today you would earn a total of  59,000  from holding Sajo Seafood or generate 12.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.25%
Values	Daily Returns

Shinhan Financial Group  vs.  Sajo Seafood

Shinhan Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shinhan Financial Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shinhan Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sajo Seafood

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sajo Seafood are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sajo Seafood sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shinhan Financial and Sajo Seafood

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

The idea behind Shinhan Financial Group and Sajo Seafood 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.