Correlation Between First Interstate and Shinhan Financial

Can any of the company-specific risk be diversified away by investing in both First Interstate 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 Interstate 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 Interstate BancSystem and Shinhan Financial Group, you can compare the effects of market volatilities on First Interstate 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 Interstate with a short position of Shinhan Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Interstate and Shinhan Financial.

Diversification Opportunities for First Interstate and Shinhan Financial

-0.49

Correlation Coefficient

First Interstate  Shinhan Financial

Very good diversification

The 3 months correlation between First and Shinhan is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding First Interstate BancSystem 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 Interstate 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 Interstate BancSystem 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 Interstate i.e., First Interstate and Shinhan Financial go up and down completely randomly.

Pair Corralation between First Interstate and Shinhan Financial

Given the investment horizon of 90 days First Interstate BancSystem is expected to generate 1.37 times more return on investment than Shinhan Financial. However, First Interstate is 1.37 times more volatile than Shinhan Financial Group. It trades about 0.09 of its potential returns per unit of risk. Shinhan Financial Group is currently generating about -0.2 per unit of risk. If you would invest  2,904  in First Interstate BancSystem on October 5, 2024 and sell it today you would earn a total of  343.00  from holding First Interstate BancSystem or generate 11.81% return on investment over 90 days.

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

First Interstate BancSystem  vs.  Shinhan Financial Group

First Interstate Ban

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Interstate BancSystem are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental drivers, First Interstate disclosed solid returns over the last few months and may actually be approaching a breakup point.

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 weak performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with First Interstate and Shinhan Financial

The main advantage of trading using opposite First Interstate and Shinhan Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Interstate 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 Interstate BancSystem 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 CEOs Directory module to screen CEOs from public companies around the world.