Correlation Between Seoul Electronics and Shinhan Financial
Can any of the company-specific risk be diversified away by investing in both Seoul Electronics 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 Seoul Electronics and Shinhan Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seoul Electronics Telecom and Shinhan Financial Group, you can compare the effects of market volatilities on Seoul Electronics 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 Seoul Electronics with a short position of Shinhan Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seoul Electronics and Shinhan Financial.
Diversification Opportunities for Seoul Electronics and Shinhan Financial
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Seoul and Shinhan is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Seoul Electronics Telecom and Shinhan Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinhan Financial and Seoul Electronics 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 Seoul Electronics Telecom 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 Seoul Electronics i.e., Seoul Electronics and Shinhan Financial go up and down completely randomly.
Pair Corralation between Seoul Electronics and Shinhan Financial
Assuming the 90 days trading horizon Seoul Electronics Telecom is expected to generate 1.8 times more return on investment than Shinhan Financial. However, Seoul Electronics is 1.8 times more volatile than Shinhan Financial Group. It trades about 0.47 of its potential returns per unit of risk. Shinhan Financial Group is currently generating about -0.03 per unit of risk. If you would invest 21,700 in Seoul Electronics Telecom on October 12, 2024 and sell it today you would earn a total of 5,200 from holding Seoul Electronics Telecom or generate 23.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Seoul Electronics Telecom vs. Shinhan Financial Group
Performance |
| Timeline |
| Seoul Electronics Telecom |
| Shinhan Financial |
Seoul Electronics and Shinhan Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seoul Electronics and Shinhan Financial
The main advantage of trading using opposite Seoul Electronics and Shinhan Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seoul Electronics 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.| Seoul Electronics vs. Hanjin Transportation Co | Seoul Electronics vs. Shinhan Inverse Copper | Seoul Electronics vs. Formetal Co | Seoul Electronics vs. Taegu Broadcasting |
| Shinhan Financial vs. Hanmi Semiconductor Co | Shinhan Financial vs. ITM Semiconductor Co | Shinhan Financial vs. Seoul Electronics Telecom | Shinhan Financial vs. Nable Communications |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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