Correlation Between Shinhan Financial and Cathedra Bitcoin

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

Diversification Opportunities for Shinhan Financial and Cathedra Bitcoin

0.61

Correlation Coefficient

Shinhan Financial  Cathedra Bitcoin

Poor diversification

The 3 months correlation between Shinhan and Cathedra is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Cathedra Bitcoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathedra Bitcoin 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 Cathedra Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathedra Bitcoin has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Cathedra Bitcoin go up and down completely randomly.

Pair Corralation between Shinhan Financial and Cathedra Bitcoin

Considering the 90-day investment horizon Shinhan Financial Group is expected to generate 0.36 times more return on investment than Cathedra Bitcoin. However, Shinhan Financial Group is 2.77 times less risky than Cathedra Bitcoin. It trades about 0.06 of its potential returns per unit of risk. Cathedra Bitcoin is currently generating about -0.09 per unit of risk. If you would invest  3,933  in Shinhan Financial Group on August 31, 2024 and sell it today you would earn a total of  93.00  from holding Shinhan Financial Group or generate 2.36% return on investment over 90 days.

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

Shinhan Financial Group  vs.  Cathedra Bitcoin

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 nearly stable technical indicators, Shinhan Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Cathedra Bitcoin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cathedra Bitcoin has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cathedra Bitcoin is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Shinhan Financial and Cathedra Bitcoin

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

The idea behind Shinhan Financial Group and Cathedra Bitcoin 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 Stocks Directory module to find actively traded stocks across global markets.