Correlation Between SHINHAN FINL and National Grid

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

Diversification Opportunities for SHINHAN FINL and National Grid

0.62

Correlation Coefficient

SHINHAN FINL  National Grid

Poor diversification

The 3 months correlation between SHINHAN and National is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding SHINHAN FINL ADR1 and National Grid PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Grid PLC 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 National Grid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Grid PLC has no effect on the direction of SHINHAN FINL i.e., SHINHAN FINL and National Grid go up and down completely randomly.

Pair Corralation between SHINHAN FINL and National Grid

Assuming the 90 days trading horizon SHINHAN FINL ADR1 is expected to under-perform the National Grid. In addition to that, SHINHAN FINL is 1.45 times more volatile than National Grid PLC. It trades about -0.08 of its total potential returns per unit of risk. National Grid PLC is currently generating about -0.09 per unit of volatility. If you would invest  1,253  in National Grid PLC on September 24, 2024 and sell it today you would lose (143.00) from holding National Grid PLC or give up 11.41% of portfolio value over 90 days.

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

SHINHAN FINL ADR1  vs.  National Grid PLC

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

National Grid PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Grid PLC 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 SHINHAN FINL and National Grid

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

The idea behind SHINHAN FINL ADR1 and National Grid PLC 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.