Correlation Between Gyeongnam Steel and Shinhan Financial
Can any of the company-specific risk be diversified away by investing in both Gyeongnam Steel 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 Gyeongnam Steel and Shinhan Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gyeongnam Steel Co and Shinhan Financial Group, you can compare the effects of market volatilities on Gyeongnam Steel 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 Gyeongnam Steel with a short position of Shinhan Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gyeongnam Steel and Shinhan Financial.
Diversification Opportunities for Gyeongnam Steel and Shinhan Financial
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Gyeongnam and Shinhan is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Gyeongnam Steel Co and Shinhan Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinhan Financial and Gyeongnam Steel 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 Gyeongnam Steel Co 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 Gyeongnam Steel i.e., Gyeongnam Steel and Shinhan Financial go up and down completely randomly.
Pair Corralation between Gyeongnam Steel and Shinhan Financial
Assuming the 90 days trading horizon Gyeongnam Steel Co is expected to generate 3.58 times more return on investment than Shinhan Financial. However, Gyeongnam Steel is 3.58 times more volatile than Shinhan Financial Group. It trades about 0.31 of its potential returns per unit of risk. Shinhan Financial Group is currently generating about -0.15 per unit of risk. If you would invest 296,500 in Gyeongnam Steel Co on September 27, 2024 and sell it today you would earn a total of 217,500 from holding Gyeongnam Steel Co or generate 73.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gyeongnam Steel Co vs. Shinhan Financial Group
Performance |
| Timeline |
| Gyeongnam Steel |
| Shinhan Financial |
Gyeongnam Steel and Shinhan Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gyeongnam Steel and Shinhan Financial
The main advantage of trading using opposite Gyeongnam Steel and Shinhan Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gyeongnam Steel 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.| Gyeongnam Steel vs. Keum Kang Steel | Gyeongnam Steel vs. Tplex Co | Gyeongnam Steel vs. PJ Metal Co | Gyeongnam Steel vs. Samhyun Steel Co |
| Shinhan Financial vs. Kukdong Oil Chemicals | Shinhan Financial vs. LG Chemicals | Shinhan Financial vs. ABOV Semiconductor Co | Shinhan Financial vs. SK Chemicals Co |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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