Correlation Between Japan Post and SHINHAN FINL

Can any of the company-specific risk be diversified away by investing in both Japan Post and SHINHAN FINL 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 Japan Post and SHINHAN FINL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Japan Post Bank and SHINHAN FINL ADR1, you can compare the effects of market volatilities on Japan Post and SHINHAN FINL 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 Japan Post with a short position of SHINHAN FINL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Post and SHINHAN FINL.

Diversification Opportunities for Japan Post and SHINHAN FINL

-0.51

Correlation Coefficient

Japan Post  SHINHAN FINL

Excellent diversification

The 3 months correlation between Japan and SHINHAN is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Japan Post Bank and SHINHAN FINL ADR1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHINHAN FINL ADR1 and Japan Post 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 Japan Post Bank are associated (or correlated) with SHINHAN FINL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHINHAN FINL ADR1 has no effect on the direction of Japan Post i.e., Japan Post and SHINHAN FINL go up and down completely randomly.

Pair Corralation between Japan Post and SHINHAN FINL

Assuming the 90 days horizon Japan Post is expected to generate 1.34 times less return on investment than SHINHAN FINL. But when comparing it to its historical volatility, Japan Post Bank is 1.07 times less risky than SHINHAN FINL. It trades about 0.02 of its potential returns per unit of risk. SHINHAN FINL ADR1 is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,148  in SHINHAN FINL ADR1 on September 26, 2024 and sell it today you would earn a total of  72.00  from holding SHINHAN FINL ADR1 or generate 2.29% return on investment over 90 days.

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

Japan Post Bank  vs.  SHINHAN FINL ADR1

Japan Post Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Post Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Japan Post may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SHINHAN FINL ADR1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SHINHAN FINL ADR1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Japan Post and SHINHAN FINL

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

The idea behind Japan Post Bank and SHINHAN FINL ADR1 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 Commodity Directory module to find actively traded commodities issued by global exchanges.