Correlation Between US Bancorp and Shinhan Financial

Can any of the company-specific risk be diversified away by investing in both US Bancorp and Shinhan Financial 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 US Bancorp and Shinhan Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US Bancorp and Shinhan Financial Group, you can compare the effects of market volatilities on US Bancorp and Shinhan Financial 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 US Bancorp with a short position of Shinhan Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Bancorp and Shinhan Financial.

Diversification Opportunities for US Bancorp and Shinhan Financial

-0.05

Correlation Coefficient

US Bancorp  Shinhan Financial

Good diversification

The 3 months correlation between USB-PH and Shinhan is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and Shinhan Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinhan Financial and US Bancorp 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 US Bancorp are associated (or correlated) with Shinhan Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinhan Financial has no effect on the direction of US Bancorp i.e., US Bancorp and Shinhan Financial go up and down completely randomly.

Pair Corralation between US Bancorp and Shinhan Financial

Assuming the 90 days trading horizon US Bancorp is expected to generate 0.47 times more return on investment than Shinhan Financial. However, US Bancorp is 2.11 times less risky than Shinhan Financial. It trades about 0.03 of its potential returns per unit of risk. Shinhan Financial Group is currently generating about 0.0 per unit of risk. If you would invest  2,190  in US Bancorp on December 29, 2024 and sell it today you would earn a total of  26.00  from holding US Bancorp or generate 1.19% return on investment over 90 days.

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

US Bancorp  vs.  Shinhan Financial Group

US Bancorp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, US Bancorp is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

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.

Pair Trading with US Bancorp and Shinhan Financial

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

The idea behind US Bancorp and Shinhan Financial Group 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.