Correlation Between Shinhan Financial and Posco Chemical
Can any of the company-specific risk be diversified away by investing in both Shinhan Financial and Posco Chemical 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 Posco Chemical 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 Posco Chemical Co, you can compare the effects of market volatilities on Shinhan Financial and Posco Chemical 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 Posco Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shinhan Financial and Posco Chemical.
Diversification Opportunities for Shinhan Financial and Posco Chemical
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Shinhan and Posco is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Posco Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Posco Chemical 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 Posco Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Posco Chemical has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Posco Chemical go up and down completely randomly.
Pair Corralation between Shinhan Financial and Posco Chemical
Assuming the 90 days trading horizon Shinhan Financial Group is expected to under-perform the Posco Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Shinhan Financial Group is 2.52 times less risky than Posco Chemical. The stock trades about -0.12 of its potential returns per unit of risk. The Posco Chemical Co is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 15,510,000 in Posco Chemical Co on October 9, 2024 and sell it today you would lose (550,000) from holding Posco Chemical Co or give up 3.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shinhan Financial Group vs. Posco Chemical Co
Performance |
| Timeline |
| Shinhan Financial |
| Posco Chemical |
Shinhan Financial and Posco Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shinhan Financial and Posco Chemical
The main advantage of trading using opposite Shinhan Financial and Posco Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shinhan Financial position performs unexpectedly, Posco Chemical 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 Posco Chemical will offset losses from the drop in Posco Chemical's long position.| Shinhan Financial vs. Daejung Chemicals Metals | Shinhan Financial vs. Daiyang Metal Co | Shinhan Financial vs. Samyoung Electronics Co | Shinhan Financial vs. Wave Electronics Co |
| Posco Chemical vs. Busan Industrial Co | Posco Chemical vs. Busan Ind | Posco Chemical vs. UNISEM Co | Posco Chemical vs. RPBio Inc |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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