Correlation Between Shinhan Financial and Pfizer

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

Diversification Opportunities for Shinhan Financial and Pfizer

0.09

Correlation Coefficient

Shinhan Financial  Pfizer

Significant diversification

The 3 months correlation between Shinhan and Pfizer is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer Inc 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 Pfizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pfizer Inc has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Pfizer go up and down completely randomly.

Pair Corralation between Shinhan Financial and Pfizer

Considering the 90-day investment horizon Shinhan Financial Group is expected to generate 1.11 times more return on investment than Pfizer. However, Shinhan Financial is 1.11 times more volatile than Pfizer Inc. It trades about 0.0 of its potential returns per unit of risk. Pfizer Inc is currently generating about -0.05 per unit of risk. If you would invest  3,287  in Shinhan Financial Group on December 28, 2024 and sell it today you would lose (9.00) from holding Shinhan Financial Group or give up 0.27% of portfolio value over 90 days.

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

Shinhan Financial Group  vs.  Pfizer Inc

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.

Pfizer Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pfizer Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Pfizer is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Shinhan Financial and Pfizer

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

The idea behind Shinhan Financial Group and Pfizer Inc 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.