Correlation Between Shinhan Financial and China Health

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

Diversification Opportunities for Shinhan Financial and China Health

0.0

Correlation Coefficient

Shinhan Financial  China Health

Pay attention - limited upside

The 3 months correlation between Shinhan and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and China Health Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Health Industries 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 China Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Health Industries has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and China Health go up and down completely randomly.

Pair Corralation between Shinhan Financial and China Health

Considering the 90-day investment horizon Shinhan Financial is expected to generate 7.61 times less return on investment than China Health. But when comparing it to its historical volatility, Shinhan Financial Group is 11.49 times less risky than China Health. It trades about 0.08 of its potential returns per unit of risk. China Health Industries is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  125.00  in China Health Industries on September 4, 2024 and sell it today you would lose (92.00) from holding China Health Industries or give up 73.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Shinhan Financial Group  vs.  China Health Industries

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.

China Health Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Health Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, China Health is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Shinhan Financial and China Health

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

The idea behind Shinhan Financial Group and China Health Industries 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.