Correlation Between Shinhan Financial and Domino’s Pizza

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

Diversification Opportunities for Shinhan Financial and Domino’s Pizza

0.02

Correlation Coefficient

Shinhan Financial  Domino’s Pizza

Significant diversification

The 3 months correlation between Shinhan and Domino’s is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Dominos Pizza Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominos Pizza 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 Domino’s Pizza. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dominos Pizza Group has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Domino’s Pizza go up and down completely randomly.

Pair Corralation between Shinhan Financial and Domino’s Pizza

Considering the 90-day investment horizon Shinhan Financial Group is expected to under-perform the Domino’s Pizza. But the stock apears to be less risky and, when comparing its historical volatility, Shinhan Financial Group is 1.33 times less risky than Domino’s Pizza. The stock trades about -0.14 of its potential returns per unit of risk. The Dominos Pizza Group is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  734.00  in Dominos Pizza Group on October 23, 2024 and sell it today you would lose (59.00) from holding Dominos Pizza Group or give up 8.04% of portfolio value over 90 days.

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

Shinhan Financial Group  vs.  Dominos Pizza 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 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.

Dominos Pizza Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dominos Pizza Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Shinhan Financial and Domino’s Pizza

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

The idea behind Shinhan Financial Group and Dominos Pizza 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.

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.