Correlation Between Jin Air and Shin Steel
Can any of the company-specific risk be diversified away by investing in both Jin Air and Shin Steel 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 Jin Air and Shin Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Jin Air Co and Shin Steel Co, you can compare the effects of market volatilities on Jin Air and Shin Steel 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 Jin Air with a short position of Shin Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jin Air and Shin Steel.
Diversification Opportunities for Jin Air and Shin Steel
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Jin and Shin is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Jin Air Co and Shin Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shin Steel and Jin Air 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 Jin Air Co are associated (or correlated) with Shin Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shin Steel has no effect on the direction of Jin Air i.e., Jin Air and Shin Steel go up and down completely randomly.
Pair Corralation between Jin Air and Shin Steel
Assuming the 90 days trading horizon Jin Air Co is expected to under-perform the Shin Steel. In addition to that, Jin Air is 1.35 times more volatile than Shin Steel Co. It trades about -0.03 of its total potential returns per unit of risk. Shin Steel Co is currently generating about -0.03 per unit of volatility. If you would invest 248,500 in Shin Steel Co on September 4, 2024 and sell it today you would lose (5,500) from holding Shin Steel Co or give up 2.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Jin Air Co vs. Shin Steel Co
Performance |
| Timeline |
| Jin Air |
| Shin Steel |
Jin Air and Shin Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Jin Air and Shin Steel
The main advantage of trading using opposite Jin Air and Shin Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jin Air position performs unexpectedly, Shin Steel 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 Shin Steel will offset losses from the drop in Shin Steel's long position.The idea behind Jin Air Co and Shin Steel Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Shin Steel vs. Samsung Electronics Co | Shin Steel vs. Samsung Electronics Co | Shin Steel vs. LG Energy Solution | Shin Steel vs. SK Hynix |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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