Correlation Between Shinhan Financial and Ayala Corp

Can any of the company-specific risk be diversified away by investing in both Shinhan Financial and Ayala Corp 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 Ayala Corp 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 Ayala Corp ADR, you can compare the effects of market volatilities on Shinhan Financial and Ayala Corp 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 Ayala Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shinhan Financial and Ayala Corp.

Diversification Opportunities for Shinhan Financial and Ayala Corp

0.11

Correlation Coefficient

Shinhan Financial  Ayala Corp

Average diversification

The 3 months correlation between Shinhan and Ayala is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Ayala Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ayala Corp ADR 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 Ayala Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ayala Corp ADR has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Ayala Corp go up and down completely randomly.

Pair Corralation between Shinhan Financial and Ayala Corp

Considering the 90-day investment horizon Shinhan Financial Group is expected to under-perform the Ayala Corp. But the stock apears to be less risky and, when comparing its historical volatility, Shinhan Financial Group is 2.11 times less risky than Ayala Corp. The stock trades about -0.2 of its potential returns per unit of risk. The Ayala Corp ADR is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  1,170  in Ayala Corp ADR on December 2, 2024 and sell it today you would lose (210.00) from holding Ayala Corp ADR or give up 17.95% of portfolio value over 90 days.

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

Shinhan Financial Group  vs.  Ayala Corp ADR

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

Ayala Corp ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ayala Corp ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Shinhan Financial and Ayala Corp

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

The idea behind Shinhan Financial Group and Ayala Corp ADR 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 Commodity Directory module to find actively traded commodities issued by global exchanges.