Correlation Between Shinhan Financial and GSE Systems

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

Diversification Opportunities for Shinhan Financial and GSE Systems

-0.63

Correlation Coefficient

Shinhan Financial  GSE Systems

Excellent diversification

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

Pair Corralation between Shinhan Financial and GSE Systems

Considering the 90-day investment horizon Shinhan Financial Group is expected to under-perform the GSE Systems. In addition to that, Shinhan Financial is 8.77 times more volatile than GSE Systems. It trades about -0.14 of its total potential returns per unit of risk. GSE Systems is currently generating about -0.44 per unit of volatility. If you would invest  462.00  in GSE Systems on October 24, 2024 and sell it today you would lose (3.00) from holding GSE Systems or give up 0.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	11.86%
Values	Daily Returns

Shinhan Financial Group  vs.  GSE Systems

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.

GSE Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GSE Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, GSE Systems is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Shinhan Financial and GSE Systems

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

The idea behind Shinhan Financial Group and GSE Systems 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.