Correlation Between State Bank and SHINHAN FINL

Can any of the company-specific risk be diversified away by investing in both State Bank and SHINHAN FINL 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 State Bank and SHINHAN FINL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between State Bank of and SHINHAN FINL ADR1, you can compare the effects of market volatilities on State Bank and SHINHAN FINL 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 State Bank with a short position of SHINHAN FINL. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Bank and SHINHAN FINL.

Diversification Opportunities for State Bank and SHINHAN FINL

-0.6

Correlation Coefficient

State Bank  SHINHAN FINL

Excellent diversification

The 3 months correlation between State and SHINHAN is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and SHINHAN FINL ADR1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHINHAN FINL ADR1 and State Bank 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 State Bank of are associated (or correlated) with SHINHAN FINL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHINHAN FINL ADR1 has no effect on the direction of State Bank i.e., State Bank and SHINHAN FINL go up and down completely randomly.

Pair Corralation between State Bank and SHINHAN FINL

Assuming the 90 days horizon State Bank of is expected to under-perform the SHINHAN FINL. But the stock apears to be less risky and, when comparing its historical volatility, State Bank of is 1.45 times less risky than SHINHAN FINL. The stock trades about 0.0 of its potential returns per unit of risk. The SHINHAN FINL ADR1 is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,148  in SHINHAN FINL ADR1 on September 26, 2024 and sell it today you would earn a total of  72.00  from holding SHINHAN FINL ADR1 or generate 2.29% return on investment over 90 days.

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

State Bank of  vs.  SHINHAN FINL ADR1

State Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in State Bank of are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, State Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SHINHAN FINL ADR1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SHINHAN FINL ADR1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with State Bank and SHINHAN FINL

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

The idea behind State Bank of and SHINHAN FINL ADR1 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.