Correlation Between Shinhan Financial and Lotte Non-Life
Can any of the company-specific risk be diversified away by investing in both Shinhan Financial and Lotte Non-Life 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 Shinhan Financial and Lotte Non-Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shinhan Financial Group and Lotte Non Life, you can compare the effects of market volatilities on Shinhan Financial and Lotte Non-Life 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 Shinhan Financial with a short position of Lotte Non-Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shinhan Financial and Lotte Non-Life.
Diversification Opportunities for Shinhan Financial and Lotte Non-Life
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Shinhan and Lotte is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Lotte Non Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotte Non Life and Shinhan Financial 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 Shinhan Financial Group are associated (or correlated) with Lotte Non-Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotte Non Life has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Lotte Non-Life go up and down completely randomly.
Pair Corralation between Shinhan Financial and Lotte Non-Life
Assuming the 90 days trading horizon Shinhan Financial is expected to generate 1.25 times less return on investment than Lotte Non-Life. But when comparing it to its historical volatility, Shinhan Financial Group is 1.73 times less risky than Lotte Non-Life. It trades about 0.05 of its potential returns per unit of risk. Lotte Non Life is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 139,500 in Lotte Non Life on September 13, 2024 and sell it today you would earn a total of 60,500 from holding Lotte Non Life or generate 43.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shinhan Financial Group vs. Lotte Non Life
Performance |
| Timeline |
| Shinhan Financial |
| Lotte Non Life |
Shinhan Financial and Lotte Non-Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shinhan Financial and Lotte Non-Life
The main advantage of trading using opposite Shinhan Financial and Lotte Non-Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shinhan Financial position performs unexpectedly, Lotte Non-Life 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 Lotte Non-Life will offset losses from the drop in Lotte Non-Life's long position.| Shinhan Financial vs. ITM Semiconductor Co | Shinhan Financial vs. BGF Retail Co | Shinhan Financial vs. Coloray International Investment | Shinhan Financial vs. ABOV Semiconductor Co |
| Lotte Non-Life vs. KB Financial Group | Lotte Non-Life vs. Shinhan Financial Group | Lotte Non-Life vs. Hana Financial | Lotte Non-Life vs. Woori Financial Group |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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