Correlation Between First Bancorp and Shinhan Financial

Can any of the company-specific risk be diversified away by investing in both First Bancorp and Shinhan Financial 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 First Bancorp and Shinhan Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Bancorp and Shinhan Financial Group, you can compare the effects of market volatilities on First Bancorp and Shinhan Financial 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 First Bancorp with a short position of Shinhan Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Bancorp and Shinhan Financial.

Diversification Opportunities for First Bancorp and Shinhan Financial

0.19

Correlation Coefficient

First Bancorp  Shinhan Financial

Average diversification

The 3 months correlation between First and Shinhan is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and Shinhan Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinhan Financial and First Bancorp 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 First Bancorp are associated (or correlated) with Shinhan Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinhan Financial has no effect on the direction of First Bancorp i.e., First Bancorp and Shinhan Financial go up and down completely randomly.

Pair Corralation between First Bancorp and Shinhan Financial

Considering the 90-day investment horizon First Bancorp is expected to generate 1.14 times more return on investment than Shinhan Financial. However, First Bancorp is 1.14 times more volatile than Shinhan Financial Group. It trades about 0.01 of its potential returns per unit of risk. Shinhan Financial Group is currently generating about -0.02 per unit of risk. If you would invest  2,120  in First Bancorp on August 31, 2024 and sell it today you would lose (9.00) from holding First Bancorp or give up 0.42% of portfolio value over 90 days.

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

First Bancorp  vs.  Shinhan Financial Group

First Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, First Bancorp is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Shinhan Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shinhan Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Shinhan Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with First Bancorp and Shinhan Financial

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

The idea behind First Bancorp and Shinhan Financial Group 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.