Correlation Between DC Media and Shinhan Inverse

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

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

Diversification Opportunities for DC Media and Shinhan Inverse

0.55

Correlation Coefficient

DC Media  Shinhan Inverse

Very weak diversification

The 3 months correlation between 263720 and Shinhan is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding DC Media Co and Shinhan Inverse Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinhan Inverse Silver and DC Media 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 DC Media Co are associated (or correlated) with Shinhan Inverse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinhan Inverse Silver has no effect on the direction of DC Media i.e., DC Media and Shinhan Inverse go up and down completely randomly.

Pair Corralation between DC Media and Shinhan Inverse

Assuming the 90 days trading horizon DC Media Co is expected to generate 2.29 times more return on investment than Shinhan Inverse. However, DC Media is 2.29 times more volatile than Shinhan Inverse Silver. It trades about 0.01 of its potential returns per unit of risk. Shinhan Inverse Silver is currently generating about -0.01 per unit of risk. If you would invest  2,670,000  in DC Media Co on October 4, 2024 and sell it today you would lose (570,000) from holding DC Media Co or give up 21.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.34%
Values	Daily Returns

DC Media Co  vs.  Shinhan Inverse Silver

DC Media

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DC Media Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DC Media sustained solid returns over the last few months and may actually be approaching a breakup point.

Shinhan Inverse Silver

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shinhan Inverse Silver are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shinhan Inverse may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with DC Media and Shinhan Inverse

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

The idea behind DC Media Co and Shinhan Inverse Silver 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.