Correlation Between HuMC and Shinhan WTI

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

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

Diversification Opportunities for HuMC and Shinhan WTI

0.33

Correlation Coefficient

HuMC  Shinhan WTI

Weak diversification

The 3 months correlation between HuMC and Shinhan is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding HuMC Co 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 HuMC 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 HuMC Co 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 HuMC i.e., HuMC and Shinhan WTI go up and down completely randomly.

Pair Corralation between HuMC and Shinhan WTI

Assuming the 90 days trading horizon HuMC Co is expected to under-perform the Shinhan WTI. But the stock apears to be less risky and, when comparing its historical volatility, HuMC Co is 2.44 times less risky than Shinhan WTI. The stock trades about -0.15 of its potential returns per unit of risk. The Shinhan WTI Futures is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  769,000  in Shinhan WTI Futures on August 30, 2024 and sell it today you would lose (54,000) from holding Shinhan WTI Futures or give up 7.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.61%
Values	Daily Returns

HuMC Co  vs.  Shinhan WTI Futures

HuMC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HuMC Co 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 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 HuMC and Shinhan WTI

The main advantage of trading using opposite HuMC and Shinhan WTI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HuMC 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 HuMC Co 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.