Correlation Between Shinhan Financial and Boralex

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

Diversification Opportunities for Shinhan Financial and Boralex

0.81

Correlation Coefficient

Shinhan Financial  Boralex

Very poor diversification

The 3 months correlation between Shinhan and Boralex is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Boralex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boralex 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 Boralex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boralex has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Boralex go up and down completely randomly.

Pair Corralation between Shinhan Financial and Boralex

Considering the 90-day investment horizon Shinhan Financial Group is expected to under-perform the Boralex. But the stock apears to be less risky and, when comparing its historical volatility, Shinhan Financial Group is 1.44 times less risky than Boralex. The stock trades about -0.4 of its potential returns per unit of risk. The Boralex is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest  2,140  in Boralex on October 7, 2024 and sell it today you would lose (128.00) from holding Boralex or give up 5.98% of portfolio value over 90 days.

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

Shinhan Financial Group  vs.  Boralex

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

Boralex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boralex has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Shinhan Financial and Boralex

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

The idea behind Shinhan Financial Group and Boralex 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.