Correlation Between Shinhan Financial and Haier Smart

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

Diversification Opportunities for Shinhan Financial and Haier Smart

-0.62

Correlation Coefficient

Shinhan Financial  Haier Smart

Excellent diversification

The 3 months correlation between Shinhan and Haier is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Haier Smart Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haier Smart Home 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 Haier Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haier Smart Home has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Haier Smart go up and down completely randomly.

Pair Corralation between Shinhan Financial and Haier Smart

Considering the 90-day investment horizon Shinhan Financial is expected to generate 37.56 times less return on investment than Haier Smart. But when comparing it to its historical volatility, Shinhan Financial Group is 9.97 times less risky than Haier Smart. It trades about 0.06 of its potential returns per unit of risk. Haier Smart Home is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  90.00  in Haier Smart Home on September 1, 2024 and sell it today you would earn a total of  85.00  from holding Haier Smart Home or generate 94.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Shinhan Financial Group  vs.  Haier Smart Home

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 latest weak performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Haier Smart Home

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Haier Smart Home are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Haier Smart reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shinhan Financial and Haier Smart

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

The idea behind Shinhan Financial Group and Haier Smart Home 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 Global Correlations module to find global opportunities by holding instruments from different markets.