Correlation Between Shinhan Inverse and NOVATECH

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

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

Diversification Opportunities for Shinhan Inverse and NOVATECH

0.44

Correlation Coefficient

Shinhan Inverse  NOVATECH

Very weak diversification

The 3 months correlation between Shinhan and NOVATECH is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Inverse Silver and NOVATECH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOVATECH 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 Silver are associated (or correlated) with NOVATECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOVATECH has no effect on the direction of Shinhan Inverse i.e., Shinhan Inverse and NOVATECH go up and down completely randomly.

Pair Corralation between Shinhan Inverse and NOVATECH

Assuming the 90 days trading horizon Shinhan Inverse Silver is expected to generate 0.53 times more return on investment than NOVATECH. However, Shinhan Inverse Silver is 1.88 times less risky than NOVATECH. It trades about -0.01 of its potential returns per unit of risk. NOVATECH Co is currently generating about -0.01 per unit of risk. If you would invest  444,500  in Shinhan Inverse Silver on October 4, 2024 and sell it today you would lose (75,500) from holding Shinhan Inverse Silver or give up 16.99% of portfolio value over 90 days.

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

Shinhan Inverse Silver  vs.  NOVATECH Co

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.

NOVATECH

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NOVATECH Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NOVATECH sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shinhan Inverse and NOVATECH

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

The idea behind Shinhan Inverse Silver and NOVATECH 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.