Correlation Between SHINHAN FINL and Japan Post

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

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

Diversification Opportunities for SHINHAN FINL and Japan Post

-0.51

Correlation Coefficient

SHINHAN FINL  Japan Post

Excellent diversification

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

Pair Corralation between SHINHAN FINL and Japan Post

Assuming the 90 days trading horizon SHINHAN FINL ADR1 is expected to under-perform the Japan Post. In addition to that, SHINHAN FINL is 1.32 times more volatile than Japan Post Bank. It trades about -0.11 of its total potential returns per unit of risk. Japan Post Bank is currently generating about 0.13 per unit of volatility. If you would invest  785.00  in Japan Post Bank on September 26, 2024 and sell it today you would earn a total of  85.00  from holding Japan Post Bank or generate 10.83% return on investment over 90 days.

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

SHINHAN FINL ADR1  vs.  Japan Post Bank

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.

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.

Pair Trading with SHINHAN FINL and Japan Post

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

The idea behind SHINHAN FINL ADR1 and Japan Post Bank 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.