Correlation Between Shinhan WTI and Wintec

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

Diversification Opportunities for Shinhan WTI and Wintec

-0.08

Correlation Coefficient

Shinhan WTI  Wintec

Good diversification

The 3 months correlation between Shinhan and Wintec is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan WTI Futures and Wintec Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wintec 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 Wintec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wintec has no effect on the direction of Shinhan WTI i.e., Shinhan WTI and Wintec go up and down completely randomly.

Pair Corralation between Shinhan WTI and Wintec

Assuming the 90 days trading horizon Shinhan WTI Futures is expected to generate 0.38 times more return on investment than Wintec. However, Shinhan WTI Futures is 2.65 times less risky than Wintec. It trades about 0.06 of its potential returns per unit of risk. Wintec Co is currently generating about 0.0 per unit of risk. If you would invest  713,000  in Shinhan WTI Futures on December 3, 2024 and sell it today you would earn a total of  37,500  from holding Shinhan WTI Futures or generate 5.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Shinhan WTI Futures  vs.  Wintec Co

Shinhan WTI Futures

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shinhan WTI Futures are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shinhan WTI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Wintec

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Shinhan WTI Futures and Wintec 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.