Correlation Between Shinhan Financial and Daihan Pharmaceutical

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

Diversification Opportunities for Shinhan Financial and Daihan Pharmaceutical

-0.6

Correlation Coefficient

Shinhan Financial  Daihan Pharmaceutical

Excellent diversification

The 3 months correlation between Shinhan and Daihan is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Daihan Pharmaceutical CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daihan Pharmaceutical 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 Daihan Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daihan Pharmaceutical has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Daihan Pharmaceutical go up and down completely randomly.

Pair Corralation between Shinhan Financial and Daihan Pharmaceutical

Assuming the 90 days trading horizon Shinhan Financial Group is expected to under-perform the Daihan Pharmaceutical. In addition to that, Shinhan Financial is 1.47 times more volatile than Daihan Pharmaceutical CoLtd. It trades about -0.03 of its total potential returns per unit of risk. Daihan Pharmaceutical CoLtd is currently generating about 0.08 per unit of volatility. If you would invest  2,574,858  in Daihan Pharmaceutical CoLtd on October 11, 2024 and sell it today you would earn a total of  35,142  from holding Daihan Pharmaceutical CoLtd or generate 1.36% return on investment over 90 days.

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

Shinhan Financial Group  vs.  Daihan Pharmaceutical CoLtd

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Daihan Pharmaceutical

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Daihan Pharmaceutical CoLtd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Daihan Pharmaceutical 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 Daihan Pharmaceutical

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

The idea behind Shinhan Financial Group and Daihan Pharmaceutical CoLtd 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.