Correlation Between Shinhan WTI and Nam Hwa
Can any of the company-specific risk be diversified away by investing in both Shinhan WTI and Nam Hwa 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 WTI and Nam Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shinhan WTI Futures and Nam Hwa Construction, you can compare the effects of market volatilities on Shinhan WTI and Nam Hwa 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 WTI with a short position of Nam Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shinhan WTI and Nam Hwa.
Diversification Opportunities for Shinhan WTI and Nam Hwa
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Shinhan and Nam is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan WTI Futures and Nam Hwa Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nam Hwa Construction and Shinhan WTI 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 WTI Futures are associated (or correlated) with Nam Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nam Hwa Construction has no effect on the direction of Shinhan WTI i.e., Shinhan WTI and Nam Hwa go up and down completely randomly.
Pair Corralation between Shinhan WTI and Nam Hwa
Assuming the 90 days trading horizon Shinhan WTI Futures is expected to generate 0.75 times more return on investment than Nam Hwa. However, Shinhan WTI Futures is 1.33 times less risky than Nam Hwa. It trades about 0.02 of its potential returns per unit of risk. Nam Hwa Construction is currently generating about -0.05 per unit of risk. If you would invest 641,500 in Shinhan WTI Futures on September 26, 2024 and sell it today you would earn a total of 90,000 from holding Shinhan WTI Futures or generate 14.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.96% |
| Values | Daily Returns |
Shinhan WTI Futures vs. Nam Hwa Construction
Performance |
| Timeline |
| Shinhan WTI Futures |
| Nam Hwa Construction |
Shinhan WTI and Nam Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shinhan WTI and Nam Hwa
The main advantage of trading using opposite Shinhan WTI and Nam Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shinhan WTI position performs unexpectedly, Nam Hwa 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 Nam Hwa will offset losses from the drop in Nam Hwa's long position.| Shinhan WTI vs. Samsung Electronics Co | Shinhan WTI vs. Samsung Electronics Co | Shinhan WTI vs. LG Energy Solution | Shinhan WTI vs. SK Hynix |
| Nam Hwa vs. Busan Industrial Co | Nam Hwa vs. Busan Ind | Nam Hwa vs. Mirae Asset Daewoo | Nam Hwa vs. Shinhan WTI Futures |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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