Correlation Between Daewoo Engineering and Shinhan Financial
Can any of the company-specific risk be diversified away by investing in both Daewoo Engineering 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 Daewoo Engineering and Shinhan Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daewoo Engineering Construction and Shinhan Financial Group, you can compare the effects of market volatilities on Daewoo Engineering 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 Daewoo Engineering with a short position of Shinhan Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daewoo Engineering and Shinhan Financial.
Diversification Opportunities for Daewoo Engineering and Shinhan Financial
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Daewoo and Shinhan is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Daewoo Engineering Constructio and Shinhan Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinhan Financial and Daewoo Engineering 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 Daewoo Engineering Construction 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 Daewoo Engineering i.e., Daewoo Engineering and Shinhan Financial go up and down completely randomly.
Pair Corralation between Daewoo Engineering and Shinhan Financial
Assuming the 90 days trading horizon Daewoo Engineering Construction is expected to generate 0.89 times more return on investment than Shinhan Financial. However, Daewoo Engineering Construction is 1.13 times less risky than Shinhan Financial. It trades about 0.05 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 366,000 in Daewoo Engineering Construction on August 30, 2024 and sell it today you would earn a total of 8,000 from holding Daewoo Engineering Construction or generate 2.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daewoo Engineering Constructio vs. Shinhan Financial Group
Performance |
| Timeline |
| Daewoo Engineering |
| Shinhan Financial |
Daewoo Engineering and Shinhan Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daewoo Engineering and Shinhan Financial
The main advantage of trading using opposite Daewoo Engineering and Shinhan Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daewoo Engineering 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.| Daewoo Engineering vs. Shinhan Financial Group | Daewoo Engineering vs. Total Soft Bank | Daewoo Engineering vs. InfoBank | Daewoo Engineering vs. Shinsegae Information Communication |
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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