Correlation Between Shinhan Financial and Hana Financial

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

Diversification Opportunities for Shinhan Financial and Hana Financial

0.66

Correlation Coefficient

Shinhan Financial  Hana Financial

Poor diversification

The 3 months correlation between Shinhan and Hana is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Hana Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hana Financial 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 Hana Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hana Financial has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Hana Financial go up and down completely randomly.

Pair Corralation between Shinhan Financial and Hana Financial

If you would invest  6,327,044  in Hana Financial on September 3, 2024 and sell it today you would lose (87,044) from holding Hana Financial or give up 1.38% 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.  Hana Financial

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.

Hana Financial

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Shinhan Financial Group and Hana Financial 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.