Correlation Between Shinhan Financial and Banco De

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

Diversification Opportunities for Shinhan Financial and Banco De

-0.39

Correlation Coefficient

Shinhan Financial  Banco De

Very good diversification

The 3 months correlation between Shinhan and Banco is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Banco De Chile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco De Chile 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 Banco De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco De Chile has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Banco De go up and down completely randomly.

Pair Corralation between Shinhan Financial and Banco De

Considering the 90-day investment horizon Shinhan Financial Group is expected to under-perform the Banco De. In addition to that, Shinhan Financial is 1.09 times more volatile than Banco De Chile. It trades about -0.17 of its total potential returns per unit of risk. Banco De Chile is currently generating about 0.19 per unit of volatility. If you would invest  2,343  in Banco De Chile on December 11, 2024 and sell it today you would earn a total of  314.00  from holding Banco De Chile or generate 13.4% return on investment over 90 days.

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

Shinhan Financial Group  vs.  Banco De Chile

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.

Banco De Chile

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banco De Chile are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Banco De demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shinhan Financial and Banco De

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

The idea behind Shinhan Financial Group and Banco De Chile 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.