Correlation Between Shinhan Financial and KCC Engineering

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

Diversification Opportunities for Shinhan Financial and KCC Engineering

0.42

Correlation Coefficient

Shinhan Financial  KCC Engineering

Very weak diversification

The 3 months correlation between Shinhan and KCC is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and KCC Engineering Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KCC Engineering Cons 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 KCC Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KCC Engineering Cons has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and KCC Engineering go up and down completely randomly.

Pair Corralation between Shinhan Financial and KCC Engineering

Assuming the 90 days trading horizon Shinhan Financial Group is expected to generate 1.75 times more return on investment than KCC Engineering. However, Shinhan Financial is 1.75 times more volatile than KCC Engineering Construction. It trades about 0.06 of its potential returns per unit of risk. KCC Engineering Construction is currently generating about -0.05 per unit of risk. If you would invest  3,739,907  in Shinhan Financial Group on September 19, 2024 and sell it today you would earn a total of  1,125,093  from holding Shinhan Financial Group or generate 30.08% return on investment over 90 days.

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

Shinhan Financial Group  vs.  KCC Engineering Construction

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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

KCC Engineering Cons

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KCC Engineering Construction 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.

Pair Trading with Shinhan Financial and KCC Engineering

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

The idea behind Shinhan Financial Group and KCC Engineering Construction 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.