Correlation Between Shinhan WTI and Youngsin Metal

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

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

Diversification Opportunities for Shinhan WTI and Youngsin Metal

0.14

Correlation Coefficient

Shinhan WTI  Youngsin Metal

Average diversification

The 3 months correlation between Shinhan and Youngsin is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan WTI Futures and Youngsin Metal Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youngsin Metal Industrial and Shinhan WTI 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 WTI Futures are associated (or correlated) with Youngsin Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Youngsin Metal Industrial has no effect on the direction of Shinhan WTI i.e., Shinhan WTI and Youngsin Metal go up and down completely randomly.

Pair Corralation between Shinhan WTI and Youngsin Metal

Assuming the 90 days trading horizon Shinhan WTI is expected to generate 17.07 times less return on investment than Youngsin Metal. But when comparing it to its historical volatility, Shinhan WTI Futures is 3.69 times less risky than Youngsin Metal. It trades about 0.03 of its potential returns per unit of risk. Youngsin Metal Industrial is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  208,500  in Youngsin Metal Industrial on September 22, 2024 and sell it today you would earn a total of  30,500  from holding Youngsin Metal Industrial or generate 14.63% return on investment over 90 days.

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

Shinhan WTI Futures  vs.  Youngsin Metal Industrial

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 somewhat strong basic indicators, Shinhan WTI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Youngsin Metal Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Youngsin Metal Industrial 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 Shinhan WTI and Youngsin Metal

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

The idea behind Shinhan WTI Futures and Youngsin Metal Industrial 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.