Correlation Between Shinhan Inverse and Maeil Dairies

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

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

Diversification Opportunities for Shinhan Inverse and Maeil Dairies

0.39

Correlation Coefficient

Shinhan Inverse  Maeil Dairies

Weak diversification

The 3 months correlation between Shinhan and Maeil is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Inverse WTI and Maeil Dairies Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maeil Dairies and Shinhan Inverse 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 Shinhan Inverse WTI are associated (or correlated) with Maeil Dairies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maeil Dairies has no effect on the direction of Shinhan Inverse i.e., Shinhan Inverse and Maeil Dairies go up and down completely randomly.

Pair Corralation between Shinhan Inverse and Maeil Dairies

Assuming the 90 days trading horizon Shinhan Inverse WTI is expected to generate 1.16 times more return on investment than Maeil Dairies. However, Shinhan Inverse is 1.16 times more volatile than Maeil Dairies Co. It trades about -0.02 of its potential returns per unit of risk. Maeil Dairies Co is currently generating about -0.06 per unit of risk. If you would invest  278,500  in Shinhan Inverse WTI on November 29, 2024 and sell it today you would lose (6,500) from holding Shinhan Inverse WTI or give up 2.33% of portfolio value over 90 days.

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

Shinhan Inverse WTI  vs.  Maeil Dairies Co

Shinhan Inverse WTI

Risk-Adjusted Performance

Very Weak

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

Maeil Dairies

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Shinhan Inverse and Maeil Dairies

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

The idea behind Shinhan Inverse WTI and Maeil Dairies Co 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.