Correlation Between Shinhan WTI and ECSTELECOM

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

Diversification Opportunities for Shinhan WTI and ECSTELECOM

0.29

Correlation Coefficient

Shinhan WTI  ECSTELECOM

Modest diversification

The 3 months correlation between Shinhan and ECSTELECOM is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan WTI Futures and ECSTELECOM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECSTELECOM 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 ECSTELECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECSTELECOM has no effect on the direction of Shinhan WTI i.e., Shinhan WTI and ECSTELECOM go up and down completely randomly.

Pair Corralation between Shinhan WTI and ECSTELECOM

Assuming the 90 days trading horizon Shinhan WTI Futures is expected to generate 0.97 times more return on investment than ECSTELECOM. However, Shinhan WTI Futures is 1.03 times less risky than ECSTELECOM. It trades about 0.03 of its potential returns per unit of risk. ECSTELECOM Co is currently generating about -0.06 per unit of risk. If you would invest  732,000  in Shinhan WTI Futures on December 27, 2024 and sell it today you would earn a total of  17,500  from holding Shinhan WTI Futures or generate 2.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Shinhan WTI Futures  vs.  ECSTELECOM Co

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.

ECSTELECOM

Risk-Adjusted Performance

Very Weak

Over the last 90 days ECSTELECOM Co 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 ECSTELECOM

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

The idea behind Shinhan WTI Futures and ECSTELECOM 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 Global Correlations module to find global opportunities by holding instruments from different markets.