Correlation Between Shinhan Financial and Credicorp

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

Diversification Opportunities for Shinhan Financial and Credicorp

-0.31

Correlation Coefficient

Shinhan Financial  Credicorp

Very good diversification

The 3 months correlation between Shinhan and Credicorp is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Credicorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credicorp 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 Credicorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credicorp has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Credicorp go up and down completely randomly.

Pair Corralation between Shinhan Financial and Credicorp

Considering the 90-day investment horizon Shinhan Financial Group is expected to under-perform the Credicorp. In addition to that, Shinhan Financial is 1.23 times more volatile than Credicorp. It trades about -0.39 of its total potential returns per unit of risk. Credicorp is currently generating about -0.24 per unit of volatility. If you would invest  19,732  in Credicorp on September 23, 2024 and sell it today you would lose (1,519) from holding Credicorp or give up 7.7% of portfolio value over 90 days.

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

Shinhan Financial Group  vs.  Credicorp

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

Credicorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Credicorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Credicorp is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Shinhan Financial and Credicorp

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

The idea behind Shinhan Financial Group and Credicorp 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.