Correlation Between Microfriend and Shinhan Financial
Can any of the company-specific risk be diversified away by investing in both Microfriend and Shinhan Financial 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 Microfriend and Shinhan Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microfriend and Shinhan Financial Group, you can compare the effects of market volatilities on Microfriend and Shinhan Financial 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 Microfriend with a short position of Shinhan Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microfriend and Shinhan Financial.
Diversification Opportunities for Microfriend and Shinhan Financial
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microfriend and Shinhan is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Microfriend and Shinhan Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinhan Financial and Microfriend 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 Microfriend are associated (or correlated) with Shinhan Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinhan Financial has no effect on the direction of Microfriend i.e., Microfriend and Shinhan Financial go up and down completely randomly.
Pair Corralation between Microfriend and Shinhan Financial
Assuming the 90 days trading horizon Microfriend is expected to under-perform the Shinhan Financial. In addition to that, Microfriend is 2.92 times more volatile than Shinhan Financial Group. It trades about -0.15 of its total potential returns per unit of risk. Shinhan Financial Group is currently generating about 0.31 per unit of volatility. If you would invest 4,775,000 in Shinhan Financial Group on November 1, 2024 and sell it today you would earn a total of 225,000 from holding Shinhan Financial Group or generate 4.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microfriend vs. Shinhan Financial Group
Performance |
| Timeline |
| Microfriend |
| Shinhan Financial |
Microfriend and Shinhan Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microfriend and Shinhan Financial
The main advantage of trading using opposite Microfriend and Shinhan Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microfriend position performs unexpectedly, Shinhan Financial 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 Shinhan Financial will offset losses from the drop in Shinhan Financial's long position.| Microfriend vs. SK Hynix | Microfriend vs. LX Semicon Co | Microfriend vs. Tokai Carbon Korea | Microfriend vs. People Technology |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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