Correlation Between Shinhan Financial and Engie SA

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

Diversification Opportunities for Shinhan Financial and Engie SA

-0.62

Correlation Coefficient

Shinhan Financial  Engie SA

Excellent diversification

The 3 months correlation between Shinhan and Engie is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Engie SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engie SA 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 Engie SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engie SA has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Engie SA go up and down completely randomly.

Pair Corralation between Shinhan Financial and Engie SA

Considering the 90-day investment horizon Shinhan Financial Group is expected to under-perform the Engie SA. But the stock apears to be less risky and, when comparing its historical volatility, Shinhan Financial Group is 3.45 times less risky than Engie SA. The stock trades about -0.03 of its potential returns per unit of risk. The Engie SA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,558  in Engie SA on December 28, 2024 and sell it today you would earn a total of  333.00  from holding Engie SA or generate 21.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Shinhan Financial Group  vs.  Engie SA

Shinhan Financial

Risk-Adjusted Performance

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.

Engie SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Engie SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Engie SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shinhan Financial and Engie SA

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

The idea behind Shinhan Financial Group and Engie SA 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.