Correlation Between Shinhan Financial and Colabor

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

Diversification Opportunities for Shinhan Financial and Colabor

0.78

Correlation Coefficient

Shinhan Financial  Colabor

Poor diversification

The 3 months correlation between Shinhan and Colabor is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Colabor Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colabor Group 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 Colabor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colabor Group has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Colabor go up and down completely randomly.

Pair Corralation between Shinhan Financial and Colabor

Considering the 90-day investment horizon Shinhan Financial Group is expected to generate 1.1 times more return on investment than Colabor. However, Shinhan Financial is 1.1 times more volatile than Colabor Group. It trades about 0.06 of its potential returns per unit of risk. Colabor Group is currently generating about 0.01 per unit of risk. If you would invest  2,479  in Shinhan Financial Group on September 12, 2024 and sell it today you would earn a total of  1,046  from holding Shinhan Financial Group or generate 42.19% 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.  Colabor Group

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 latest unfluctuating performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Colabor Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Colabor Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental 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.

Pair Trading with Shinhan Financial and Colabor

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

The idea behind Shinhan Financial Group and Colabor Group 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.