Correlation Between Shinhan Financial and Daewoo Engineering
Can any of the company-specific risk be diversified away by investing in both Shinhan Financial and Daewoo Engineering 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 Daewoo Engineering 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 Daewoo Engineering Construction, you can compare the effects of market volatilities on Shinhan Financial and Daewoo Engineering 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 Daewoo Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shinhan Financial and Daewoo Engineering.
Diversification Opportunities for Shinhan Financial and Daewoo Engineering
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Shinhan and Daewoo is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Daewoo Engineering Constructio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daewoo Engineering 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 Daewoo Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daewoo Engineering has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Daewoo Engineering go up and down completely randomly.
Pair Corralation between Shinhan Financial and Daewoo Engineering
Assuming the 90 days trading horizon Shinhan Financial Group is expected to generate 1.29 times more return on investment than Daewoo Engineering. However, Shinhan Financial is 1.29 times more volatile than Daewoo Engineering Construction. It trades about 0.08 of its potential returns per unit of risk. Daewoo Engineering Construction is currently generating about -0.02 per unit of risk. If you would invest 3,405,690 in Shinhan Financial Group on September 1, 2024 and sell it today you would earn a total of 1,894,310 from holding Shinhan Financial Group or generate 55.62% 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. Daewoo Engineering Constructio
Performance |
| Timeline |
| Shinhan Financial |
| Daewoo Engineering |
Shinhan Financial and Daewoo Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shinhan Financial and Daewoo Engineering
The main advantage of trading using opposite Shinhan Financial and Daewoo Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shinhan Financial position performs unexpectedly, Daewoo Engineering 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 Daewoo Engineering will offset losses from the drop in Daewoo Engineering's long position.| Shinhan Financial vs. Nice Information Telecommunication | Shinhan Financial vs. Daishin Information Communications | Shinhan Financial vs. Samlip General Foods | Shinhan Financial vs. Hyundai Green Food |
| Daewoo Engineering vs. Korea New Network | Daewoo Engineering vs. ICD Co | Daewoo Engineering vs. DYPNF CoLtd | Daewoo Engineering vs. Busan Industrial 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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