Correlation Between Shinhan Financial and Wave Life

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

Diversification Opportunities for Shinhan Financial and Wave Life

-0.71

Correlation Coefficient

Shinhan Financial  Wave Life

Pay attention - limited upside

The 3 months correlation between Shinhan and Wave is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Wave Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wave Life Sciences 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 Wave Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wave Life Sciences has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Wave Life go up and down completely randomly.

Pair Corralation between Shinhan Financial and Wave Life

Considering the 90-day investment horizon Shinhan Financial is expected to generate 2.47 times less return on investment than Wave Life. But when comparing it to its historical volatility, Shinhan Financial Group is 2.37 times less risky than Wave Life. It trades about 0.06 of its potential returns per unit of risk. Wave Life Sciences is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,432  in Wave Life Sciences on August 31, 2024 and sell it today you would earn a total of  67.00  from holding Wave Life Sciences or generate 4.68% 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.  Wave Life Sciences

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.

Wave Life Sciences

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wave Life Sciences are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Wave Life exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shinhan Financial and Wave Life

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

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