Correlation Between Shinhan Financial and Givaudan

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

Diversification Opportunities for Shinhan Financial and Givaudan

-0.63

Correlation Coefficient

Shinhan Financial  Givaudan

Excellent diversification

The 3 months correlation between Shinhan and Givaudan is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Givaudan SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Givaudan SA ADR 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 Givaudan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Givaudan SA ADR has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Givaudan go up and down completely randomly.

Pair Corralation between Shinhan Financial and Givaudan

Considering the 90-day investment horizon Shinhan Financial is expected to generate 7.93 times less return on investment than Givaudan. But when comparing it to its historical volatility, Shinhan Financial Group is 1.26 times less risky than Givaudan. It trades about 0.0 of its potential returns per unit of risk. Givaudan SA ADR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  8,593  in Givaudan SA ADR on December 29, 2024 and sell it today you would earn a total of  96.00  from holding Givaudan SA ADR or generate 1.12% return on investment over 90 days.

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

Shinhan Financial Group  vs.  Givaudan SA ADR

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.

Givaudan SA ADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Givaudan SA ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Givaudan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shinhan Financial and Givaudan

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

The idea behind Shinhan Financial Group and Givaudan SA ADR 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.