Correlation Between Shinhan Financial and SANUWAVE Health

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

Diversification Opportunities for Shinhan Financial and SANUWAVE Health

-0.68

Correlation Coefficient

Shinhan Financial  SANUWAVE Health

Excellent diversification

The 3 months correlation between Shinhan and SANUWAVE is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and SANUWAVE Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SANUWAVE Health 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 SANUWAVE Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SANUWAVE Health has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and SANUWAVE Health go up and down completely randomly.

Pair Corralation between Shinhan Financial and SANUWAVE Health

Considering the 90-day investment horizon Shinhan Financial Group is expected to under-perform the SANUWAVE Health. But the stock apears to be less risky and, when comparing its historical volatility, Shinhan Financial Group is 3.46 times less risky than SANUWAVE Health. The stock trades about -0.12 of its potential returns per unit of risk. The SANUWAVE Health is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  709.00  in SANUWAVE Health on September 17, 2024 and sell it today you would earn a total of  1,315  from holding SANUWAVE Health or generate 185.47% return on investment over 90 days.

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

Shinhan Financial Group  vs.  SANUWAVE Health

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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SANUWAVE Health

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SANUWAVE Health are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SANUWAVE Health showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shinhan Financial and SANUWAVE Health

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

The idea behind Shinhan Financial Group and SANUWAVE Health 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.