Correlation Between Shinhan Financial and Korean Air
Can any of the company-specific risk be diversified away by investing in both Shinhan Financial and Korean Air 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 Korean Air 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 Korean Air Lines, you can compare the effects of market volatilities on Shinhan Financial and Korean Air 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 Korean Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shinhan Financial and Korean Air.
Diversification Opportunities for Shinhan Financial and Korean Air
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Shinhan and Korean is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Korean Air Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korean Air Lines 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 Korean Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korean Air Lines has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Korean Air go up and down completely randomly.
Pair Corralation between Shinhan Financial and Korean Air
Assuming the 90 days trading horizon Shinhan Financial is expected to generate 1.59 times less return on investment than Korean Air. But when comparing it to its historical volatility, Shinhan Financial Group is 1.37 times less risky than Korean Air. It trades about 0.21 of its potential returns per unit of risk. Korean Air Lines is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 2,340,000 in Korean Air Lines on November 7, 2024 and sell it today you would earn a total of 140,000 from holding Korean Air Lines or generate 5.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 89.47% |
| Values | Daily Returns |
Shinhan Financial Group vs. Korean Air Lines
Performance |
| Timeline |
| Shinhan Financial |
| Korean Air Lines |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
Shinhan Financial and Korean Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shinhan Financial and Korean Air
The main advantage of trading using opposite Shinhan Financial and Korean Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shinhan Financial position performs unexpectedly, Korean Air 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 Korean Air will offset losses from the drop in Korean Air's long position.| Shinhan Financial vs. Hana Financial | Shinhan Financial vs. JC Chemical Co | Shinhan Financial vs. INFINITT Healthcare Co | Shinhan Financial vs. Korea Information Communications |
| Korean Air vs. Asia Technology Co | Korean Air vs. Digital Imaging Technology | Korean Air vs. Polaris Office Corp | Korean Air vs. Bosung Power Technology |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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