Correlation Between Shinhan Financial and Samsung Life

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

Diversification Opportunities for Shinhan Financial and Samsung Life

-0.12

Correlation Coefficient

Shinhan Financial  Samsung Life

Good diversification

The 3 months correlation between Shinhan and Samsung is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Samsung Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Life 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 Samsung Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Life has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Samsung Life go up and down completely randomly.

Pair Corralation between Shinhan Financial and Samsung Life

Assuming the 90 days trading horizon Shinhan Financial Group is expected to under-perform the Samsung Life. In addition to that, Shinhan Financial is 1.04 times more volatile than Samsung Life. It trades about -0.07 of its total potential returns per unit of risk. Samsung Life is currently generating about 0.04 per unit of volatility. If you would invest  10,040,000  in Samsung Life on September 14, 2024 and sell it today you would earn a total of  350,000  from holding Samsung Life or generate 3.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Shinhan Financial Group  vs.  Samsung Life

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Samsung Life

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Samsung Life are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Samsung Life 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 Samsung Life

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

The idea behind Shinhan Financial Group and Samsung Life 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.