Correlation Between Shinhan Financial and Eli Lilly

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

Diversification Opportunities for Shinhan Financial and Eli Lilly

-0.37

Correlation Coefficient

Shinhan Financial  Eli Lilly

Very good diversification

The 3 months correlation between Shinhan and Eli is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly 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 Eli Lilly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eli Lilly has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Eli Lilly go up and down completely randomly.

Pair Corralation between Shinhan Financial and Eli Lilly

Considering the 90-day investment horizon Shinhan Financial is expected to generate 5.1 times less return on investment than Eli Lilly. But when comparing it to its historical volatility, Shinhan Financial Group is 1.57 times less risky than Eli Lilly. It trades about 0.02 of its potential returns per unit of risk. Eli Lilly and is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  78,182  in Eli Lilly and on December 27, 2024 and sell it today you would earn a total of  4,494  from holding Eli Lilly and or generate 5.75% return on investment over 90 days.

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

Shinhan Financial Group  vs.  Eli Lilly and

Shinhan Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shinhan Financial Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Eli Lilly

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eli Lilly and are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, Eli Lilly may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Shinhan Financial and Eli Lilly

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

The idea behind Shinhan Financial Group and Eli Lilly and 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.