Correlation Between Shinhan WTI and Sejong Telecom

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

Diversification Opportunities for Shinhan WTI and Sejong Telecom

-0.37

Correlation Coefficient

Shinhan WTI  Sejong Telecom

Very good diversification

The 3 months correlation between Shinhan and Sejong is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan WTI Futures and Sejong Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sejong Telecom 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 Sejong Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sejong Telecom has no effect on the direction of Shinhan WTI i.e., Shinhan WTI and Sejong Telecom go up and down completely randomly.

Pair Corralation between Shinhan WTI and Sejong Telecom

Assuming the 90 days trading horizon Shinhan WTI is expected to generate 3.03 times less return on investment than Sejong Telecom. In addition to that, Shinhan WTI is 1.56 times more volatile than Sejong Telecom. It trades about 0.02 of its total potential returns per unit of risk. Sejong Telecom is currently generating about 0.1 per unit of volatility. If you would invest  40,500  in Sejong Telecom on December 26, 2024 and sell it today you would earn a total of  2,000  from holding Sejong Telecom or generate 4.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	87.72%
Values	Daily Returns

Shinhan WTI Futures  vs.  Sejong Telecom

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 1 (%) 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.

Sejong Telecom

Risk-Adjusted Performance

OK

Over the last 90 days Sejong Telecom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, Sejong Telecom may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Shinhan WTI and Sejong Telecom

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

The idea behind Shinhan WTI Futures and Sejong Telecom 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.