Correlation Between Shinhan WTI and NOVAREX CoLtd

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

Diversification Opportunities for Shinhan WTI and NOVAREX CoLtd

0.26

Correlation Coefficient

Shinhan WTI  NOVAREX CoLtd

Modest diversification

The 3 months correlation between Shinhan and NOVAREX is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan WTI Futures and NOVAREX CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOVAREX CoLtd 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 NOVAREX CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOVAREX CoLtd has no effect on the direction of Shinhan WTI i.e., Shinhan WTI and NOVAREX CoLtd go up and down completely randomly.

Pair Corralation between Shinhan WTI and NOVAREX CoLtd

Assuming the 90 days trading horizon Shinhan WTI Futures is expected to generate 0.55 times more return on investment than NOVAREX CoLtd. However, Shinhan WTI Futures is 1.81 times less risky than NOVAREX CoLtd. It trades about 0.12 of its potential returns per unit of risk. NOVAREX CoLtd is currently generating about -0.04 per unit of risk. If you would invest  706,500  in Shinhan WTI Futures on September 15, 2024 and sell it today you would earn a total of  25,500  from holding Shinhan WTI Futures or generate 3.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Shinhan WTI Futures  vs.  NOVAREX CoLtd

Shinhan WTI Futures

Risk-Adjusted Performance

1 of 100

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.

NOVAREX CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NOVAREX CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shinhan WTI and NOVAREX CoLtd

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

The idea behind Shinhan WTI Futures and NOVAREX CoLtd 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.