Correlation Between Shinhan Financial and Woori Financial

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

Diversification Opportunities for Shinhan Financial and Woori Financial

0.3

Correlation Coefficient

Shinhan Financial  Woori Financial

Weak diversification

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

Pair Corralation between Shinhan Financial and Woori Financial

Assuming the 90 days trading horizon Shinhan Financial Group is expected to generate 1.29 times more return on investment than Woori Financial. However, Shinhan Financial is 1.29 times more volatile than Woori Financial Group. It trades about 0.05 of its potential returns per unit of risk. Woori Financial Group is currently generating about 0.06 per unit of risk. If you would invest  3,388,913  in Shinhan Financial Group on September 12, 2024 and sell it today you would earn a total of  1,606,087  from holding Shinhan Financial Group or generate 47.39% 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.  Woori Financial Group

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.

Woori Financial Group

Risk-Adjusted Performance

2 of 100

Weak

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

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

The idea behind Shinhan Financial Group and Woori Financial Group 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.