Correlation Between Shinhan Financial and Q Capital

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

Diversification Opportunities for Shinhan Financial and Q Capital

0.61

Correlation Coefficient

Shinhan Financial  Q Capital

Poor diversification

The 3 months correlation between Shinhan and 016600 is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Q Capital Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Q Capital Partners 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 Q Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Q Capital Partners has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Q Capital go up and down completely randomly.

Pair Corralation between Shinhan Financial and Q Capital

Assuming the 90 days trading horizon Shinhan Financial Group is expected to generate 1.53 times more return on investment than Q Capital. However, Shinhan Financial is 1.53 times more volatile than Q Capital Partners. It trades about -0.03 of its potential returns per unit of risk. Q Capital Partners is currently generating about -0.23 per unit of risk. If you would invest  5,338,937  in Shinhan Financial Group on September 12, 2024 and sell it today you would lose (343,937) from holding Shinhan Financial Group or give up 6.44% of portfolio value over 90 days.

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

Shinhan Financial Group  vs.  Q Capital Partners

Shinhan Financial

Risk-Adjusted Performance

0 of 100

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 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.

Q Capital Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Q Capital Partners 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shinhan Financial and Q Capital

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

The idea behind Shinhan Financial Group and Q Capital Partners 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.