Correlation Between Shinhan Financial and Homecast CoLtd
Can any of the company-specific risk be diversified away by investing in both Shinhan Financial and Homecast CoLtd 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 Homecast CoLtd 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 Homecast CoLtd, you can compare the effects of market volatilities on Shinhan Financial and Homecast CoLtd 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 Homecast CoLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shinhan Financial and Homecast CoLtd.
Diversification Opportunities for Shinhan Financial and Homecast CoLtd
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Shinhan and Homecast is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Homecast CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homecast CoLtd 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 Homecast CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homecast CoLtd has no effect on the direction of Shinhan Financial i.e., Shinhan Financial and Homecast CoLtd go up and down completely randomly.
Pair Corralation between Shinhan Financial and Homecast CoLtd
Assuming the 90 days trading horizon Shinhan Financial Group is expected to generate 0.51 times more return on investment than Homecast CoLtd. However, Shinhan Financial Group is 1.96 times less risky than Homecast CoLtd. It trades about -0.05 of its potential returns per unit of risk. Homecast CoLtd is currently generating about -0.1 per unit of risk. If you would invest 5,060,000 in Shinhan Financial Group on October 13, 2024 and sell it today you would lose (75,000) from holding Shinhan Financial Group or give up 1.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shinhan Financial Group vs. Homecast CoLtd
Performance |
| Timeline |
| Shinhan Financial |
| Homecast CoLtd |
Shinhan Financial and Homecast CoLtd Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shinhan Financial and Homecast CoLtd
The main advantage of trading using opposite Shinhan Financial and Homecast CoLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shinhan Financial position performs unexpectedly, Homecast CoLtd 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 Homecast CoLtd will offset losses from the drop in Homecast CoLtd's long position.| Shinhan Financial vs. Hanmi Semiconductor Co | Shinhan Financial vs. ITM Semiconductor Co | Shinhan Financial vs. Seoul Electronics Telecom | Shinhan Financial vs. Nable Communications |
| Homecast CoLtd vs. Seoul Food Industrial | Homecast CoLtd vs. DB Insurance Co | Homecast CoLtd vs. Organic Special Pet | Homecast CoLtd vs. Shinhan Financial Group |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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