Correlation Between Poongsan and Shinhan WTI

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

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

Diversification Opportunities for Poongsan and Shinhan WTI

0.19

Correlation Coefficient

Poongsan  Shinhan WTI

Average diversification

The 3 months correlation between Poongsan and Shinhan is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Poongsan and Shinhan WTI Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinhan WTI Futures and Poongsan 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 Poongsan are associated (or correlated) with Shinhan WTI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinhan WTI Futures has no effect on the direction of Poongsan i.e., Poongsan and Shinhan WTI go up and down completely randomly.

Pair Corralation between Poongsan and Shinhan WTI

Assuming the 90 days trading horizon Poongsan is expected to under-perform the Shinhan WTI. In addition to that, Poongsan is 1.69 times more volatile than Shinhan WTI Futures. It trades about -0.05 of its total potential returns per unit of risk. Shinhan WTI Futures is currently generating about -0.03 per unit of volatility. If you would invest  794,000  in Shinhan WTI Futures on September 23, 2024 and sell it today you would lose (70,000) from holding Shinhan WTI Futures or give up 8.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.56%
Values	Daily Returns

Poongsan  vs.  Shinhan WTI Futures

Poongsan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Poongsan 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.

Shinhan WTI Futures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shinhan WTI Futures has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shinhan WTI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Poongsan and Shinhan WTI

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

The idea behind Poongsan and Shinhan WTI Futures 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.