Correlation Between Shinhan Financial and KeyCorp

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

Diversification Opportunities for Shinhan Financial and KeyCorp

-0.49

Correlation Coefficient

Shinhan Financial  KeyCorp

Very good diversification

The 3 months correlation between Shinhan and KeyCorp is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp 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 KeyCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KeyCorp has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and KeyCorp go up and down completely randomly.

Pair Corralation between Shinhan Financial and KeyCorp

Considering the 90-day investment horizon Shinhan Financial Group is expected to generate 0.76 times more return on investment than KeyCorp. However, Shinhan Financial Group is 1.32 times less risky than KeyCorp. It trades about 0.04 of its potential returns per unit of risk. KeyCorp is currently generating about 0.03 per unit of risk. If you would invest  2,950  in Shinhan Financial Group on August 31, 2024 and sell it today you would earn a total of  1,076  from holding Shinhan Financial Group or generate 36.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Shinhan Financial Group  vs.  KeyCorp

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 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.

KeyCorp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite sluggish basic indicators, KeyCorp may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Shinhan Financial and KeyCorp

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

The idea behind Shinhan Financial Group and KeyCorp 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 Stocks Directory module to find actively traded stocks across global markets.