Correlation Between Shinhan Financial and Shinsegae Information

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

Diversification Opportunities for Shinhan Financial and Shinsegae Information

0.3

Correlation Coefficient

Shinhan Financial  Shinsegae Information

Weak diversification

The 3 months correlation between Shinhan and Shinsegae is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Shinsegae Information Communic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinsegae Information 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 Shinsegae Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinsegae Information has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Shinsegae Information go up and down completely randomly.

Pair Corralation between Shinhan Financial and Shinsegae Information

Assuming the 90 days trading horizon Shinhan Financial Group is expected to generate 1.58 times more return on investment than Shinsegae Information. However, Shinhan Financial is 1.58 times more volatile than Shinsegae Information Communication. It trades about 0.03 of its potential returns per unit of risk. Shinsegae Information Communication is currently generating about -0.04 per unit of risk. If you would invest  5,498,882  in Shinhan Financial Group on September 4, 2024 and sell it today you would earn a total of  141,118  from holding Shinhan Financial Group or generate 2.57% return on investment over 90 days.

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

Shinhan Financial Group  vs.  Shinsegae Information Communic

Shinhan Financial

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shinhan Financial Group are ranked lower than 2 (%) 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.

Shinsegae Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shinsegae Information Communication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shinsegae Information 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 Shinsegae Information

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

The idea behind Shinhan Financial Group and Shinsegae Information Communication 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.