Correlation Between TOPMATERIAL and Shinhan Financial

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

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

Diversification Opportunities for TOPMATERIAL and Shinhan Financial

0.74

Correlation Coefficient

TOPMATERIAL  Shinhan Financial

Poor diversification

The 3 months correlation between TOPMATERIAL and Shinhan is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding TOPMATERIAL LTD and Shinhan Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinhan Financial and TOPMATERIAL 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 TOPMATERIAL LTD 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 TOPMATERIAL i.e., TOPMATERIAL and Shinhan Financial go up and down completely randomly.

Pair Corralation between TOPMATERIAL and Shinhan Financial

Assuming the 90 days trading horizon TOPMATERIAL LTD is expected to under-perform the Shinhan Financial. In addition to that, TOPMATERIAL is 1.48 times more volatile than Shinhan Financial Group. It trades about -0.16 of its total potential returns per unit of risk. Shinhan Financial Group is currently generating about -0.08 per unit of volatility. If you would invest  5,540,000  in Shinhan Financial Group on October 8, 2024 and sell it today you would lose (720,000) from holding Shinhan Financial Group or give up 13.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

TOPMATERIAL LTD  vs.  Shinhan Financial Group

TOPMATERIAL LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TOPMATERIAL LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 TOPMATERIAL and Shinhan Financial

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

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.