Correlation Between BNK Financial and Shinhan WTI

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

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

Diversification Opportunities for BNK Financial and Shinhan WTI

0.14

Correlation Coefficient

BNK Financial  Shinhan WTI

Average diversification

The 3 months correlation between BNK and Shinhan is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding BNK Financial Group 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 BNK 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 BNK Financial Group 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 BNK Financial i.e., BNK Financial and Shinhan WTI go up and down completely randomly.

Pair Corralation between BNK Financial and Shinhan WTI

Assuming the 90 days trading horizon BNK Financial Group is expected to generate 1.07 times more return on investment than Shinhan WTI. However, BNK Financial is 1.07 times more volatile than Shinhan WTI Futures. It trades about 0.06 of its potential returns per unit of risk. Shinhan WTI Futures is currently generating about -0.01 per unit of risk. If you would invest  993,000  in BNK Financial Group on September 2, 2024 and sell it today you would earn a total of  63,000  from holding BNK Financial Group or generate 6.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.67%
Values	Daily Returns

BNK Financial Group  vs.  Shinhan WTI Futures

BNK Financial Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BNK Financial Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BNK Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 BNK Financial and Shinhan WTI

The main advantage of trading using opposite BNK Financial and Shinhan WTI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BNK Financial 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 BNK Financial Group 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.