Correlation Between Shinhan Financial and Hanwha Chemical
Can any of the company-specific risk be diversified away by investing in both Shinhan Financial and Hanwha 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 Hanwha 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 Hanwha Chemical Corp, you can compare the effects of market volatilities on Shinhan Financial and Hanwha 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 Hanwha Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shinhan Financial and Hanwha Chemical.
Diversification Opportunities for Shinhan Financial and Hanwha Chemical
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Shinhan and Hanwha is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Hanwha Chemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanwha Chemical Corp 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 Hanwha Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanwha Chemical Corp has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Hanwha Chemical go up and down completely randomly.
Pair Corralation between Shinhan Financial and Hanwha Chemical
Assuming the 90 days trading horizon Shinhan Financial is expected to generate 8.34 times less return on investment than Hanwha Chemical. But when comparing it to its historical volatility, Shinhan Financial Group is 5.54 times less risky than Hanwha Chemical. It trades about 0.19 of its potential returns per unit of risk. Hanwha Chemical Corp is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 1,545,000 in Hanwha Chemical Corp on October 28, 2024 and sell it today you would earn a total of 465,000 from holding Hanwha Chemical Corp or generate 30.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shinhan Financial Group vs. Hanwha Chemical Corp
Performance |
| Timeline |
| Shinhan Financial |
| Hanwha Chemical Corp |
Shinhan Financial and Hanwha Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shinhan Financial and Hanwha Chemical
The main advantage of trading using opposite Shinhan Financial and Hanwha Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shinhan Financial position performs unexpectedly, Hanwha 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 Hanwha Chemical will offset losses from the drop in Hanwha Chemical's long position.| Shinhan Financial vs. Hanil Chemical Ind | Shinhan Financial vs. Hanwha Chemical Corp | Shinhan Financial vs. BIT Computer Co | Shinhan Financial vs. CG Hi Tech |
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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