Correlation Between ChipsMedia and Shinhan Financial

Can any of the company-specific risk be diversified away by investing in both ChipsMedia and Shinhan 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 ChipsMedia and Shinhan Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ChipsMedia and Shinhan Financial Group, you can compare the effects of market volatilities on ChipsMedia and Shinhan 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 ChipsMedia with a short position of Shinhan Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of ChipsMedia and Shinhan Financial.

Diversification Opportunities for ChipsMedia and Shinhan Financial

-0.55

Correlation Coefficient

ChipsMedia  Shinhan Financial

Excellent diversification

The 3 months correlation between ChipsMedia and Shinhan is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding ChipsMedia and Shinhan Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinhan Financial and ChipsMedia 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 ChipsMedia are associated (or correlated) with Shinhan Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinhan Financial has no effect on the direction of ChipsMedia i.e., ChipsMedia and Shinhan Financial go up and down completely randomly.

Pair Corralation between ChipsMedia and Shinhan Financial

Assuming the 90 days trading horizon ChipsMedia is expected to generate 4.77 times more return on investment than Shinhan Financial. However, ChipsMedia is 4.77 times more volatile than Shinhan Financial Group. It trades about 0.26 of its potential returns per unit of risk. Shinhan Financial Group is currently generating about 0.12 per unit of risk. If you would invest  1,495,000  in ChipsMedia on October 27, 2024 and sell it today you would earn a total of  353,000  from holding ChipsMedia or generate 23.61% return on investment over 90 days.

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

ChipsMedia  vs.  Shinhan Financial Group

ChipsMedia

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ChipsMedia are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ChipsMedia sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with ChipsMedia and Shinhan Financial

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

The idea behind ChipsMedia and Shinhan 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.