Correlation Between Shinhan Financial and SM Entertainment
Can any of the company-specific risk be diversified away by investing in both Shinhan Financial and SM Entertainment 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 SM Entertainment 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 SM Entertainment Co, you can compare the effects of market volatilities on Shinhan Financial and SM Entertainment 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 SM Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shinhan Financial and SM Entertainment.
Diversification Opportunities for Shinhan Financial and SM Entertainment
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Shinhan and 041510 is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and SM Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Entertainment 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 SM Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Entertainment has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and SM Entertainment go up and down completely randomly.
Pair Corralation between Shinhan Financial and SM Entertainment
Assuming the 90 days trading horizon Shinhan Financial Group is expected to under-perform the SM Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Shinhan Financial Group is 1.08 times less risky than SM Entertainment. The stock trades about 0.0 of its potential returns per unit of risk. The SM Entertainment Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 7,737,506 in SM Entertainment Co on October 1, 2024 and sell it today you would lose (267,506) from holding SM Entertainment Co or give up 3.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shinhan Financial Group vs. SM Entertainment Co
Performance |
| Timeline |
| Shinhan Financial |
| SM Entertainment |
Shinhan Financial and SM Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shinhan Financial and SM Entertainment
The main advantage of trading using opposite Shinhan Financial and SM Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shinhan Financial position performs unexpectedly, SM Entertainment 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 SM Entertainment will offset losses from the drop in SM Entertainment's long position.| Shinhan Financial vs. BIT Computer Co | Shinhan Financial vs. Sam Yang Foods | Shinhan Financial vs. Seoul Food Industrial | Shinhan Financial vs. Organic Special Pet |
| SM Entertainment vs. YG Entertainment | SM Entertainment vs. JYP Entertainment | SM Entertainment vs. Cube Entertainment | SM Entertainment vs. FNC Entertainment 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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