Correlation Between Shinhan WTI and Naver

Can any of the company-specific risk be diversified away by investing in both Shinhan WTI and Naver 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 Naver 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 Naver, you can compare the effects of market volatilities on Shinhan WTI and Naver 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 Naver. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shinhan WTI and Naver.

Diversification Opportunities for Shinhan WTI and Naver

0.18

Correlation Coefficient

Shinhan WTI  Naver

Average diversification

The 3 months correlation between Shinhan and Naver is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan WTI Futures and Naver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naver 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 Naver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naver has no effect on the direction of Shinhan WTI i.e., Shinhan WTI and Naver go up and down completely randomly.

Pair Corralation between Shinhan WTI and Naver

Assuming the 90 days trading horizon Shinhan WTI is expected to generate 1.3 times less return on investment than Naver. But when comparing it to its historical volatility, Shinhan WTI Futures is 1.47 times less risky than Naver. It trades about 0.04 of its potential returns per unit of risk. Naver is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  20,151,200  in Naver on December 4, 2024 and sell it today you would earn a total of  548,800  from holding Naver or generate 2.72% 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.  Naver

Shinhan WTI Futures

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shinhan WTI Futures are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Naver

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Naver are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Naver 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 WTI and Naver

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

The idea behind Shinhan WTI Futures and Naver 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.