Correlation Between Shinhan Financial and Fremont Gold

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

Diversification Opportunities for Shinhan Financial and Fremont Gold

0.42

Correlation Coefficient

Shinhan Financial  Fremont Gold

Very weak diversification

The 3 months correlation between Shinhan and Fremont is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Fremont Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fremont Gold 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 Fremont Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fremont Gold has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Fremont Gold go up and down completely randomly.

Pair Corralation between Shinhan Financial and Fremont Gold

Considering the 90-day investment horizon Shinhan Financial is expected to generate 1066.72 times less return on investment than Fremont Gold. But when comparing it to its historical volatility, Shinhan Financial Group is 11.64 times less risky than Fremont Gold. It trades about 0.0 of its potential returns per unit of risk. Fremont Gold is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  4.80  in Fremont Gold on December 29, 2024 and sell it today you would earn a total of  4.50  from holding Fremont Gold or generate 93.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	32.79%
Values	Daily Returns

Shinhan Financial Group  vs.  Fremont Gold

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.

Fremont Gold

Risk-Adjusted Performance

Solid

Over the last 90 days Fremont Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Fremont Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shinhan Financial and Fremont Gold

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

The idea behind Shinhan Financial Group and Fremont Gold 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 Global Correlations module to find global opportunities by holding instruments from different markets.