Correlation Between Shinhan Financial and RCABS

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

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

Diversification Opportunities for Shinhan Financial and RCABS

-0.14

Correlation Coefficient

Shinhan Financial  RCABS

Good diversification

The 3 months correlation between Shinhan and RCABS is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and RCABS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCABS Inc and Shinhan Financial 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 Financial Group are associated (or correlated) with RCABS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCABS Inc has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and RCABS go up and down completely randomly.

Pair Corralation between Shinhan Financial and RCABS

Considering the 90-day investment horizon Shinhan Financial Group is expected to under-perform the RCABS. But the stock apears to be less risky and, when comparing its historical volatility, Shinhan Financial Group is 7.24 times less risky than RCABS. The stock trades about -0.21 of its potential returns per unit of risk. The RCABS Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.07  in RCABS Inc on November 30, 2024 and sell it today you would lose (0.01) from holding RCABS Inc or give up 14.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Shinhan Financial Group  vs.  RCABS Inc

Shinhan Financial

Risk-Adjusted Performance

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 March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

RCABS Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RCABS Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, RCABS sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shinhan Financial and RCABS

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

The idea behind Shinhan Financial Group and RCABS Inc 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.