Correlation Between Shinhan WTI and Echomarketing CoLtd

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

Diversification Opportunities for Shinhan WTI and Echomarketing CoLtd

0.04

Correlation Coefficient

Shinhan WTI  Echomarketing CoLtd

Significant diversification

The 3 months correlation between Shinhan and Echomarketing is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan WTI Futures and Echomarketing CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Echomarketing 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 Echomarketing CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Echomarketing CoLtd has no effect on the direction of Shinhan WTI i.e., Shinhan WTI and Echomarketing CoLtd go up and down completely randomly.

Pair Corralation between Shinhan WTI and Echomarketing CoLtd

Assuming the 90 days trading horizon Shinhan WTI Futures is expected to generate 0.65 times more return on investment than Echomarketing CoLtd. However, Shinhan WTI Futures is 1.53 times less risky than Echomarketing CoLtd. It trades about 0.05 of its potential returns per unit of risk. Echomarketing CoLtd is currently generating about -0.01 per unit of risk. If you would invest  764,500  in Shinhan WTI Futures on October 22, 2024 and sell it today you would earn a total of  70,500  from holding Shinhan WTI Futures or generate 9.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.32%
Values	Daily Returns

Shinhan WTI Futures  vs.  Echomarketing CoLtd

Shinhan WTI Futures

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shinhan WTI Futures are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shinhan WTI sustained solid returns over the last few months and may actually be approaching a breakup point.

Echomarketing CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Echomarketing CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Echomarketing CoLtd 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 Echomarketing CoLtd

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

The idea behind Shinhan WTI Futures and Echomarketing 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.